Hong Kong stocks greet 2021 with tech rally, China’s big telcos pare losses triggered by NYSE delisting

Technology and smartphone parts suppliers keep Hang Seng Index on firm opening while China’s big telecoms companies, oil giants pare earlier deep losses
The Shanghai Composite Index added 0.9 per cent, after a 13.9 per cent advance in 2020

Hang Seng Index

SCMP Reporter

Published: 10:56am, 4 Jan 2021

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Hong Kong and China stocks rose on the first day of 2021 trading as technology stocks related to smartphone manufacturing surged. A slump in some of China’s biggest phone carriers and oil companies receded as traders evaluated the impact of US delisting action.

The Hang Seng Index added 0.9 per cent to 27,472.81 at the close. It surged 16 per cent last quarter, helping to narrow the decline in 2020 to 3.4 per cent. The Shanghai Composite Index also advanced by 0.9 per cent to 3,502.96. The gauge jumped 7.9 per cent last quarter, bringing the rally in 2020 to 13.9 per cent.

Smartphone maker Xiaomi Corp climbed 6.2 per cent to HK$35.25 to extend its record-breaking run, while Sunny Optical Technology jumped 4.2 per cent to HK$177. The 31-member Hang Seng Tech Index rose 0.8 per cent, after a 90 per cent surge over the past three quarters.

Hong Kong’s stock market has greeted the first day of trading with a winning start in eight of the past 10 years, according to Bloomberg data. Reports over the weekend also aided optimism, with Financial Secretary Paul Chan Mo-po saying the city could exit from its worst recession this year. The economy likely shrank 6.1 per cent in 2020, according to official estimate.

Elsewhere, the Caixin/Markit manufacturing purchasing managers’ index, which tracks sentiment among smaller, private firms, fell to 53.0 last month from a decade-high 54.9 in November. While upbeat, December’s reading was the softest in three months, today’s report showed.

Equities gained across major Asia-Pacific markets with benchmark in Australia and Taiwan rising by more than 1.2 per cent while South Korea’s Kospi surged 2.5 per cent. Stocks in Japan slipped 0.7 per cent.

The rally in Hong Kong was tempered by a sell-off in China’s biggest phone carriers that erased some HK$12 billion (US$1.5 billion) of their value, following a ban on US investors on owning or trading in blacklisted companies with ties to Chinese military.

China Mobile declined 0.8 per cent to HK$43.85 after losing as much as 4.5 per cent to the lowest since June 2006. China Telecom dropped 2.8 per cent to HK$2.09 after crashing as much as 5.6 per cent. China Unicom rose 0.4 per cent, erasing a 3.9 per cent slide. CNOOC, a unit of China’s biggest oil explorer, fell 1.8 per cent to HK$7.05.

S&P Dow Jones Indices to remove 21 Chinese companies from benchmarks after US blacklisting

“US-China tensions have generated no shortage of headlines over the past couple years, driving a prolonged period of volatility,” analysts at T. Rowe Price wrote in a report. “We expect this is likely to continue and could result in new and expanded restrictions.”

The New York Stock Exchange said it would delist three Chinese telecommunications giants from January 7 to comply with a November 12 executive order against so-called Communist Chinese military companies.

The Treasury Department last month strengthened that order by defining the scope of US investors and expanded the prohibited assets of 35 targeted entities to include their majority-controlled or owned units. Chinese regulators on Sunday said the decision was politically motivated.

The delisting by NYSE may prompt global investors to convert or liquidate their holdings, adding selling pressure to stocks traded in Hong Kong, while index compilers may also tweak their benchmark constituents, analysts have said.

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