Alibaba, Tencent, pharma stocks fuel best rally in two weeks as China inflation report boosts stimulus bets

Consumer prices rose 2.5 per cent in August from a year earlier versus 2.7 per cent in July; reading also came in slower than 2.8 per cent market consensus
Hang Seng Index members have lost HK$649 billion in market value this month amid concerns about China’s Covid-hit economic slowdown

Hong Kong stock market

Jiaxing Li

Published: 10:47am, 9 Sep 2022

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Hong Kong stocks advanced, halting a six-day decline as tech companies fuelled the biggest market rally in two weeks. A government report showing slower inflation in China helped boost the outlook for more monetary easing to shore up the economy.

The Hang Seng Index climbed 2.7 per cent at 19,362.25 at the close, the most since August 25. The Tech Index surged 2.6 per cent, as a technical reading showed the recent slump was near exhaustion level. The Shanghai composite gained 0.8 per cent.

Alibaba Group jumped 3 per cent to HK$89.80 while Tencent advanced 1.7 per cent to HK$307. Hansoh Pharmaceutical gained 3.3 per cent to HK$13.60 and CSPC Pharma added 2.8 per cent to HK$7.98. Techtronic surged 4.2 per cent to HK$96.45 while Country Garden jumped 17 per cent to HK$2.57.

“The Chinese government has realised the severe economic impact brought by strict Covid control measures and lockdowns, so it’s very likely [we could] see more stimulus on the way,” said Dickie Wong, executive director at Kingston Securities. Overnight gains in US equities also boosted local investors’ confidence, he added.

Chinese stocks get cheaper for money managers who don’t want to be late for economy reopening party

Inflation in China slowed last month, boosting the scope for more monetary stimulus from the central bank. Consumer prices rose 2.5 per cent in August from a year earlier, versus 2.7 per cent in July, the statistics bureau said on Friday. Producer prices index increased 2.3 per cent versus 4.2 per cent in July.

Aggregate financing totalled 2.43 trillion yuan (US$351 billion) in August, the People’s Bank of China announced after the market close, a sign more credit is flowing for businesses. That beat the estimate of 2.08 trillion yuan by the economists tracked by Bloomberg.

The 73-member Hang Seng Index fell 0.5 per cent since Friday, adding to a 3.6 per cent sell-off last week. They had lost HK$649 billion (US$82 billion) in market value this month through Thursday. China’s unrelenting Covid-19 fight has caused several snap lockdowns, hurting key manufacturing hubs. Manufacturing contracted in August while exports shrank sequentially from July.

China on Thursday ordered movement curbs to prevent Covid-19 from spreading ahead of the Communist Party’s 20th National Congress in Beijing next month, where President Xi Jinping is expected to win a third term in power.

Four of the five stocks debuted on Friday with gains. In Shanghai, biotechnology company MGI Tech added 15 per cent to 100 yuan and Shandong Sinoglory Health Food surged 44 per cent to 15.19 yuan.

In Shenzhen, Liaoning Xinde New Material Technology jumped 16 per cent to 160.40 yuan while Jiangsu Tongxingbao Intelligent Transportation Technology advanced 10 per cent to 20.75 yuan. Beijing Jiaman Dress Co dropped 16 per cent to 34.03 yuan.

Elsewhere in Asia, Japanese equities gained 0.4 per cent while Australia added 0.7 per cent. Stocks in South Korea rose 0.3 per cent. The S&P 500 Index advanced 0.7 per cent overnight.

With additional reporting by Zhang Shidong.