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

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A sculpture of bulls in the Lujiazui business district in Shanghai. Photo: Bloomberg

Published: 10:47am, 9 Sep 2022Updated: 4:38pm, 9 Sep 2022

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.

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.