Hong Kong and China markets rise on strong manufacturing data from world’s second-largest economy

Hang Seng Index rose 0.9 per cent, while the Shanghai Composite gained 1.8 per cent
Chinese manufacturing reported sharpest improvement in 10 years in November, according to Caixin/Markit PMI

Hang Seng Index

Martin Choi

Published: 11:07am, 1 Dec, 2020

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The Hong Kong and China markets started December on a strong note, boosted by positive manufacturing data from the world’s second-largest economy released on Tuesday.

The Hang Seng Index gained 0.9 per cent to 26,567.68, after its biggest drop in six weeks on Monday. The Shanghai Composite also rose, gaining 1.8 per cent for its biggest daily increase in three weeks.

“The official and non-official manufacturing data shows the economic recovery in China had strong momentum going forward, boosting sentiment in the Hong Kong and mainland markets,” said Kenny Tang Sing-hing, the co-founder and chief executive of Royston Securities.

The Caixin/Markit manufacturing purchasing managers’ index (PMI) rose to 54.9 in November from 53.6 in October, its sharpest improvement in 10 years. The data also beat the expectations of a Bloomberg survey, which pointed to a slight decline to 53.5. A reading above 50 means that activity in the sector is expanding. The Caixin/Markit PMI focuses more on small, private firms unlike the official index, whose respondents come mostly from larger, state-owned companies.

China’s official manufacturing PMI, released on Monday, stood at 52.1 in November, rising from 51.4 in October to its highest level since September 2017.

Cyclical stocks, or those that are particularly sensitive to economic cycles, such as Chinese financials, outperformed on Tuesday, Tang said.

On the mainland, Chinese banks led the gains, with a gauge tracking the sector rising 4 per cent according to Eastmoney.com. Bank of Xi’an and Jiangsu Zijin Rural Commercial Bank both rose by the upper trading limit of 10 per cent.

Chinese financials gained in Hong Kong as well. ICBC added 3.7 per cent, while Ping An Insurance rose 3.6 per cent. China Life Insurance also rose 2.5 per cent.

Wuxi Biologics, which is researching coronavirus drugs, led the gains among blue chips on the benchmark Hang Seng Index. Its existing shares gained 6.9 per cent, while new shares that emerged after a stock split last month gained 0.9 per cent.

Chinese food delivery giant Meituan-Dianping slipped 0.3 per cent to HK$289.20, reversing from gains of as much as 3.3 per cent. The company reported a 28.8 per cent surge in revenue to 35.4 billion yuan (US$5.4 billion) in the quarter ended September 30, up from 27.5 billion yuan in the same period last year, after the market close on Monday. That was ahead of a market consensus of 34 billion yuan compiled by Bloomberg.

Brokerage UOB Kay Hian maintained a buy rating for Meituan-Dianping and raised its target price to HK$343.00 from HK$328.00, on expectations that the company would continue to expand its market share in the food delivery segment. It was also expected to increase its presence in the fresh groceries segment, analyst Julia Pan said in the report on Tuesday.

Cnooc fell 4.7 per cent to HK$7.75. The state-owned oil giant crashed 14 per cent on Monday after Reuters reported that the Trump administration was poised to add China’s top offshore oil and gas producer to a sanctions list, threatening to cripple its international operations.

Sino Biopharmaceuticals plunged 11.8 per cent to HK$6.88, after its third-quarter earnings missed expectations. The company also reported that its net profit for the first nine months of the year had dropped by 18 per cent to 1.85 billion yuan, in a filing to the stock exchange after the market close on Monday. The Chinese government’s centralised drug procurement programme has led to cuts in the prices of some of the company’s products, it said.

Investors also weighed tightened social distancing restrictions in Hong Kong amid rising Covid-19 infections against new developments on the coronavirus vaccine front.

After trading hours on Monday, Carrie Lam Cheng Yuet-ngor, the city’s leader, announced that Hong Kong will revert to a series of tough social-distancing measures to tackle a surge in Covid-19 infections. These include restricting public gatherings to only two people at a time, reduced restaurant dine-in hours, closure of more entertainment venues, civil servants working from home once again, a sharp increase in fines for non-compliance and a hotline for reporting offenders.

Overnight, US firm Moderna said it will file for emergency authorisation of its Covid-19 vaccine in the United States and Europe on Monday, after full results confirmed a high efficacy estimated at 94.1 per cent.

Yunnan Jianzhijia Health Chain, which operates drug stores in China, gained 44 per cent to 104.96 yuan from its initial public offering price of 72.89 yuan in Shanghai.

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