Hong Kong stocks soar by most since July 2020 as Alibaba, developers rally on China rate cuts, spending stimulus

China trimmed one-year loan prime rate for a second time in a month, while the five-year rate fell for the first time since April 2020 as policy easing gathers momentum

Stocks closed at the highest level in two months as Alibaba, Tencent led tech peers while property developers gained in relief rally

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Time to go bullish on Chinese stocks as China eases while central banks elsewhere tighten their policies, some analysts say. Photo: Simon Song

Published: 10:28am, 20 Jan 2022Updated: 4:55pm, 20 Jan 2022

Hong Kong stocks surged by the most in 18 months after China cut a key lending rate for a second time in a month and stepped up infrastructure spending to prop up growth. Alibaba Group Holding led gains among tech peers.

The Hang Seng Index advanced 3.4 per cent on Thursday to a two-month high. The Tech Index jumped 4.5 per cent, the most in a week, while the Shanghai Composite Index slipped 0.1 per cent. The MSCI China Index, the broadest measure of onshore and offshore stocks, has gained US$25 billion in value this week through Wednesday.

Property developers led Thursday’s rally on optimism cheaper and freer flow of credit will alleviate an industry-wide liquidity crunch and revive home sales. China is drafting rules that will make it easier for developers to access proceeds from presales of homes, according to media reports.

“The new cycle of easing has come as expected,” said Xu Chi, an analyst based in Shanghai at Zhongtai Securities. “We should remain positive on the stock market” as risk appetite is set to improve, he added.

China’s one-year loan prime rate, set on the 20th every month, fell by 10 basis points to 3.7 per cent, according to central bank data. The rate was trimmed by five basis points on December 20, the first decline since April 2020. The five-year rate fell five basis points to 4.6 per cent on Thursday, the first since April 2020.

Country Garden Services surged 15.5 per cent, while its former parent Country Garden rallied 4.3 per cent and Longfor gained 2.5 per cent. Alibaba, the owner of this newspaper, jumped 5.9 per cent and Tencent Holdings added 6.6 per cent despite trading without entitlement to special interim dividends.

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