Hong Kong stocks snap three-day slump as oil firms rebound while Evergrande halts free-fall

Oil firms rebounded as crude held above US$70 a barrel after recovering from the lowest level since May
China Evergrande soared in a relief rally after a 26 per cent free-fall this week amid debt controversy

Hang Seng Index

Martin Choi

Published: 11:00am, 22 Jul 2021

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Hong Kong stocks arrested a three-day slump as Chinese oil giants advanced while shares of debt-stricken developer China Evergrande surged in a relief rally.

The Hang Seng Index rose 1.8 per cent to 27,723.84 at the close of trading, halting a 2.8 per cent loss over the past three trading sessions this week. Markets in mainland China also gained, with the Shanghai Composite rising 0.3 per cent as the local Star Market for tech firms celebrated its second anniversary.

China’s three biggest oil majors advanced. PetroChina rose 3.7 per cent to HK$3.34, Sinopec added 3.7 per cent to HK$3.68 and CNOOC gained 3.4 per cent to HK$8.11 as crude climbed and held above US$70 a barrel from its lowest level since May.

China Evergrande soared 7.9 per cent to HK$7.81, after plunging more than 26 per cent over three preceding days. The developer said it has resolved a dispute with lender China Guangfa Bank over a project loan. This followed after banks including HSBC and ICBC stopped offering mortgage loans for its unfinished projects.

“Now that the Evergrande’s situation appears to have stabilised a bit, market confidence has returned and this has led to a technical rebound in the markets,” said Stanley Chan, director of research at Emperor Securities. The steep losses “had made the markets nervous and investors will remain attentive,” he added.

Concerns about the Delta variant’s impact on the economy may have been overblown recently. “The situation does not appear to be so severe, and this has helped oil prices and markets to rebound,” Chan added.

The announcement of a meeting between US deputy secretary of state Wendy Sherman and Chinese Foreign Minister Wang Yi early next week has also helped market sentiment, Chan said.

In a statement on Wednesday, the US State Department said the discussions were part of “ongoing US efforts to hold candid exchanges with PRC officials to advance US interests and values and to responsibly manage the relationship”.

02:09

Death toll continues to rise after floods in central China that displaced over 1.2 million people

Shanghai’s Star Market, China’s Nasdaq-style board, has emerged as a safe haven for investors seeking shelter from Beijing’s crackdown on technology companies. The Star Market 50 index of the 50 most valuable companies has risen to a one-year high this month. It has also gained 28 per cent since a low in March this year.

Elsewhere in the mainland market, companies from Henan province saw a mixed reaction, though largely spared of a disastrous sell-off after devastating floods in and around the capital Zhengzhou killed at least 25 people and displaced around 1.24 million.

Henan Qingshuiyuan Technology, a producer of water treatment agents, fell 5.8 per cent to 9.79 yuan. Zhongyuan Environmental Protection, which provides ecological environment services, fell 2.5 per cent to 6.27 yuan. Jiaozuo Wanfang Aluminum also fell 2.3 per cent to 8.54 yuan. WH Group climbed 1.8 per cent in Hong Kong, while Muyuan Foods gained in Shenzhen.

Markets in the Asia-Pacific rose, tracking overnight gains in the US market. Japan’s Nikkei 225 rose 0.6 per cent, while South Korea’s Kospi and Australia’s S&P/ASX 200 both gained 1.1 per cent.

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