China, Hong Kong markets climb on trade hopes, strong comeback by stocks that mysteriously plunged

Hong Kong and China stocks climbed on Friday, boosted by higher hopes for a resolution to the US-China trade war and a strong comeback by a clutch of companies that plunged suddenly on Thursday.

The Hang Seng Index climbed 1.25 per cent, or 335.18 points, to close the week at 27,090.81 with eight of the nine sub-indexes in positive territory. Friday’s close was at the highest level so far this year, and it is up nearly 5 per centper cent since January trading began.

The Shanghai Composite Index rose 1.42 per cent, or 36.36 points, to 2,596.00. The CSI 300 of blue-chips closed up 1.8 per cent, or 56.75 points, to 3,168.17. Both were up for their third straight week and saw their biggest weekly gains in two months. The Shanghai Composite – the worst performer among major markets in the world last year – is up 4 per cent for the year.

Markets this week have seen big swings between gains and losses, dominated by macro factors including China’s signals for stimulus measures, more progress with trade talks and a slowing economy hurt by the trade war.

A Wall Street Journal report suggesting Treasury Secretary Steven Mnuchin was a proponent of easing tariffs boosted market sentiments, even though the Treasury Department later denied the report.

Investors are hopeful as Chinese Vice-Premier Liu He confirmed on Thursday he will attend talks in Washington on January 30 and 31. US stocks rallied overnight.

“Signals of trade talk progress and even the easing of US tariffs lifted sentiment. Investors all expected the Hang Seng to rise above the 27,000 level,” said Kingston Lin King-ham, director of securities brokerage AMTD.

Meanwhile, Jiayuan International Group, a Chinese property developer that mysteriously plummeted by as much as 81 per cent in late Thursday trading, shot up by nearly 75 per cent to HK$4.40. The company said after market close on Thursday it had already repaid a US$350 billion bond debt, which was rumoured to be the cause of the crash.

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Sunshine 100 China, another developer, surged nearly 30 per cent, after diving 65 per cent on Thursday. Internet of things solution provider Rentian Tech climbed 37.50 per cent, a day after it plunged 73 per cent. None of the stocks were part of the Hang Sang, but their massive drops weighed on the market and the broader property sector on Thursday.

“There seems not to be a real reason behind the sudden plunge. It was probably herd effect in which a major short force triggered a panic sell-off,” said Lin.

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Apart from the rebound, IT stocks paced the advance with the Hang Seng subindex rising 6.76 per cent, the most among all subindices.

Chinese gaming giant Tencent rose 1.75 per cent, after it launched a trial testing of the new mobile title Game of Thrones: Winter is Coming, which it licensed from Warner Bros.

Tencent shares took a beating last year from Chinese regulator’s tightened approval of new titles, but have rebounded by a third since an October low as restrictions appear to be easing.

Sunny Optical gained 7.66 per cent to HK$71.65, while AAC Technologies rose 5.47 per cent to HK$48.20, both to their highest levels in over a month. On Thursday, AAC Tech announced a buy-back of 219,500 shares worth over HK$10 million.

Castor Pang Wai-sun, head of research, Core Pacific-Yamaichi, said he thinks the Friday’s gains the pair were just a short-term rebound.

“It is just a single day rebound,” he said. “After reviewing their share price and valuations, I can conclude the rebounds won’t last too long.”

Smartphone and home appliance maker Xiaomi rose 4.3 per cent to HK$10.16 after launching its first share buy-back action since debuting in July. The company bought back 6.14 million class B shares at a price of HK$9.76 apiece, it said in a statement on Friday.

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Shares of the much-watched company have declined around 40 per cent from its offer price of HK$17 amid a slumping market and dimmed appetite for new economy stocks.

In another dramatic price movement, Chong Sing Holdings – a Chinese fintech company that has business in digital payment, online lending and blockchain – plunged 32.67 per cent. While it was not clear what was behind the sudden plunge, activist short seller Bonitas Research published a report last September accusing the company of fabricating financial records.

Shares of the stock had declined 78 per cent as of Thursday since the short report was released, even though Chong Sing has denied the allegations and actively bought back stocks.

On the mainland, China’s top four liquor makers continued gain as investors predicted a rising demand for products ahead of Chinese New Year at the beginning of February.

Kwei Moutai Co Ltd, the world’s largest alcohol firm by market cap, rose 3.7 per cent to 683.61 yuan in Shanghai. Among fellow producers of Baijiu, a white Chinese liquor, the second top maker Wuliangye Yibin gained 3.78 per cent to 53.88 in Shenzhen, while number three Jiangsu Yanghe Brewery ended up 2.55 per cent to 100 yuan.

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Meanwhile, in the initial public offering market, China Gingko Education Group ended steady at HK$1.35, after dropping 3.5 per cent from its offer price in debut trading.

The private college and vocation school operator based in the southwestern province of Sichuan applied to go public amid concerns China’s regulators will tighten private schools’ expansion with a pending new law.