Hong Kong, mainland stocks extend rally as CICC predicts China to ease fiscal tightening soon

China may start easing fiscal tightening over the next two months following sequential slowdown in growth last quarter, CICC says in report

Hotpot chain Haidilao led gainers as Morgan Stanley upgraded stock with HK$55 price target

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A bull sculpture outside the Exchange Square where the Hong Kong Stock Exchange is located in Central. Photo: Dickson Lee

Published: 10:54am, 26 May 2021Updated: 5:33pm, 26 May 2021

Hong Kong stocks advanced on optimism that foreign investors will flock to local markets, following signs that the Chinese government would loosen the nation’s fiscal tightening.

The Hang Seng Index rose for a second day, adding 0.9 per cent to approach a one-month high of 29,166.01. The Shanghai Composite gained 0.3 per cent to 3,593.36, after reaching a three-month high on Tuesday.

Chinese hotpot chain Haidilao led gainers among blue chip stocks, rising 4.8 per cent to HK$48 after Morgan Stanley analysts upgraded the stock to “overweight” with a price target of HK$55, according to Bloomberg data.

The extent of fiscal tightening may ease in China over the next two months, after slower sequential growth in the first quarter, analysts at China’s biggest investment bank CICC, said in a report on Tuesday. The view was based on fiscal surplus in the first four months, and potentially smaller deficit than budgeted for the rest of 2021.

Guotai Junan Securities said in a May 23 report that the Shanghai Composite Index could break out of sideways trading and rise to the 4,000 points, a level not seen since 2015, as concerns about inflation and policy tightening risks eased.

Hong Kong Exchanges and Clearing rose 1.7 per cent to HK$482.80 to reach the highest in nearly a month after chief executive Nicolas Aguzin pledged the bourse operator would keep a steady course connecting China with global markets.