Hong Kong and mainland stocks rallied, as fresh data and positive business sentiment out of China reinforced bets that recovery is gaining speed in the world’s second-largest economy after the devastation of the coronavirus. The Hang Seng Index accelerated its gains in afternoon trading on Friday, rising 1 per cent to 25,373.12, the highest level since March 10. It ended the week with a 3.4 per cent gain. On the mainland, the Shanghai Composite Index closed 2 per cent higher at 3,152.81. That was its highest level since April 24, 2019. It recorded a 5.8 per cent surge this week, racking up its third consecutive weekly gain. While the Hong Kong stocks remains in bear territory, leading fund managers predict it will pick up over the next six months, due to an expected capital inflow from the mainland and dirt-cheap valuations. The Hong Kong dollar touched 7.7500 per US dollar again, underscoring that money is flowing into the city despite concerns about China tightening its grip. “As the national security laws has been enacted, relevant uncertainties for the stock market have disappeared,” said Ernie Hon, head of research at Essence International Securities in Hong Kong, adding that he expects Hong Kong stocks will most likely continue to advance in July. “The valuation of Hong Kong stocks is way lower than other major markets, so recovery of valuation is happening, and recent IPOs have brought capital into Hong Kong.” Auto stocks led the gains in Hong Kong, as sales of passenger cars in China rose for three consecutive months, jumping 11 per cent in June to 2.28 million, indicating further economic recovery. BYD surged nearly 14 per cent, while Geely Automobile Holdings surged nearly 13 per cent. Financial stocks were also big winners. Ping An Insurance rose 1.4 per cent. Index heavyweight Tencent climbed 1.2 per cent to at record-high HK$524.5, after the tech giant closed for the first time above HK$500 on Thursday. Tencent’s market capitalisation reached more than HK$5 trillion. China’s services sector activities grew at the fastest pace in more than a decade in June, data released Friday showed. The Caixin/Markit services Purchasing Managers’ Index (PMI) rose to 58.4, the highest reading since April 2010, from May’s 55.0. China benchmarks also rose, as did other major markets in the Asia-Pacific region. Spot gold slipped a bit to US$1,774.84 an ounce. The safe haven has risen 17 per cent this year amid global economic uncertainties as it eyed a fourth week of gains. The rally in Hong Kong came despite a newly enacted national security that triggered local protests and further soured tensions between Beijing and Washington, and Beijing and London. The US Congress passed a bill that would allow the US to sanction Chinese officials who clamp down on protesters in Hong Kong. Meanwhile, the UK government said it will not back down after Beijing condemned Prime Minister Boris Johnson’s promise to allow millions of Hong Kong citizens to move to UK and receive permanent residency in five years. China markets have been on fire, as a stream of data has signalled the economy is steadily improving. As of Thursday, major mainland benchmarks had recouped losses suffered since January 23, when Beijing started to order lockdowns in many Chinese cities for about three months. Meanwhile, the People’s Bank of China released surveys that showed business sentiment among bankers and entrepreneurs improved in the second quarter. “China’s stock market has resumed its bull market which started in January 2019, after pausing for several months during the pandemic,” said Li Daxiao, chief economist of Yingda Securities. “China is leading other countries in economic recovery, as shown by recent data … Foreign capital also is increasingly getting involved in the market, and more local funds entered the market, especially when seeing it [Shanghai Composite Index] broke 3,000.” On the mainland, security firms were big winners. China Securities and Citic Securities surged by the daily cap of 10 per cent on the mainland after Bloomberg cited anonymous sources as saying that Citic Group, the parent of China’s largest broker Citic Securities, will purchase shares of China Securities from its largest shareholder Central Huijin Investment Ltd. Zheshang Securities also shot up by 10 per cent. Coal producers soared as coal supplies remain tight in summer, which is usually the peak season, and some coal producers recently raised prices. Shanxi Coal International Energy Group and Huolinhe Opencut Coal Industry Corp. shot up 10 per cent, which is the daily limit for most stocks in China. Japan’s Nikkei 225, South Korea’s Kospi, and Australia’s S&P/ASX 200 rose less than one per cent. Overnight, US stocks posted modest gains, after pulling back some ahead of the long July 4 holiday weekend and concerns about coronavirus outbreaks. Data came out that 4.8 million US jobs were added in June, far higher than the 2.9 million expected. Additional reporting by Deb Price