Hong Kong stocks rose for a second day on the back of a rally in technology stocks while traders weighed the impact of rising Covid-19 infections to China’s economy. Tencent-backed game developer Krafton slumped in South Korea. The Hang Seng Index rose 1.2 per cent to 26,605.62 at the close of trading, the most since July 29. The Hang Seng Tech Index climbed 2.5 per cent, as Meituan rallied 8.4 per cent to HK$239 and Tencent gained 5.3 per cent to HK$486.20. The Shanghai Composite surged 1 per cent. Investors in Hong Kong and China have turned more constructive towards the internet sector following the recent sell-off, Nomura analysts led by Shi Jialong wrote in a note to clients on Monday, saying most of the internet leaders should emerge stronger from the regulatory storm. “In our view, the internet sector as a whole may trade rangebound in the near term before likely seeing a consistent rally in the fourth quarter if the regulatory environment stabilises by then,” according to the report. China Evergrande soared 7.3 per cent to HK$5.87 per cent, while its new-energy vehicle unit rose 8 per cent to HK$13.20 and property management arm surged 20.5 per cent to HK$6.70. The group was holding talks with state-owned and private companies to sell its assets for cash, according to Reuters. Meanwhile, Krafton, the maker of multiplayer video game series PUBG, slumped as much as 20 per cent to 400,500 won, before closing 8.8 per cent below its offer price. Its association with Tencent, a 15.4 per cent owner, may have infected its debut amid heightened regulatory scrutiny on the industry. Elsewhere, China saw 143 new infections on Monday of which 108 were local origins, the government said . Beijing is sticking to its zero-tolerance Covid-19 strategy, indicating authorities would not be opening its borders any time soon to contain the virus. “Investors are likely to shift their focus to the recent sporadic outbreak of Delta variant in China from regulation risks,” Tommy Xie, head of Greater China research and strategy at OCBC Bank said in a report. “China’s zero tolerance approach means the service sector is likely to face the consequence of tighter people movement control,” he added. China is testing millions of people as the outbreak spread to 17 provinces after the highly transmissible Delta was detected among airport staff in Nanjing on July 20. The country is facing its biggest challenge since the epidemic peaked in Wuhan last year. Investors will be closely monitoring the situation, said Kenny Wen, wealth management strategist at Everbright Sun Hung Kai. Unless new cases rebound sharply, and the central government further tightens travel and lockdown measures, the short-term impact will be limited on Hong Kong stocks, he added.