Hong Kong stocks surge as some funds turn bullish on Alibaba and tech peers while Kuaishou, Xpeng, Swire rally before index review

Hang Seng Index logged a third day of rally as the Year of the Dragon delivered on its early promise
Kuaishou, Xpeng, JD Logistics and Swire Properties surged; they are prime candidates for benchmark index inclusion, according to CICC analysts

Hong Kong stock market

SCMP Reporter

Published: 11:00am, 16 Feb 2024

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Hong Kong stocks logged the biggest jump in almost two weeks after reports showed some fund managers have turned upbeat on China’s biggest technology companies as valuations cheapened. Xpeng, JD Logistics and Kuaishou rallied on speculation they will join the city’s benchmark index from next month.

The Hang Seng Index advanced 2.5 per cent to 16,339.96 on Friday, bringing the gain this week to 3.9 per cent. The Tech Index jumped 3.7 per cent. Both gauges marked the best rally since February 6. Financial markets in mainland China will reopen on Monday after a week-long Lunar New Year holiday.

Alibaba Group climbed 2.4 per cent to HK$73 while e-commerce peer JD.com jumped 4.9 per cent to HK$95.75 and Tencent added 2.2 per cent to HK$291.80. Sportswear maker Li Ning added 4.9 per cent to HK$21.25 and EV maker Li Auto added 5.8 per cent to HK$126.70.

Casino operator Sands China rallied 4.9 per cent to HK$24.50before its annual earnings report today. HSBC rose 1 per cent to HK$61.95 before releasing its 2023 report card next week.

Michael Burry of the Big Short fame, made Alibaba and JD.com among his fund’s top holdings last quarter, according to its regulatory filing this week. Hedge funds Renaissance Technologies, Saba Capital and Point72 added new positions in Alibaba, as did Canada Pension Plan Investment Board and Oaktree Capital Management.

Alibaba Group, the owner of the South China Morning Post, has risen 11 per cent in the past one month. Still, the stock has lost 26 per cent of its value over the past one year amid earnings disappointment, industry rivalry and regulatory headwinds at home.

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Chinese stocks listed at home and in Hong Kong have lost more than US$1 trillion of value since early 2021, before authorities in Beijing stepped in earlier this month to put a floor under the rout. Officials have attempted to boost market confidence through market purchases by state investment funds and measures to curb short selling.

“An upside case of unorthodox measures should not be ruled out, given recent positive signs of stepped-up policies” from Beijing, macro and equity strateigists at UBS Chief Investment Office said in a report. “Cheap valuations and low global fund allocations also present a buying opportunity.”

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Meanwhile, Kuaishou Technology added 2.2 per cent to HK$45.10, Swire Properties 3.1 per cent to HK$15.34 and electric-car maker Xpeng gained 5.9 per cent to HK$37.50, while JD Logistics surged 6.6 per cent to HK$7.77. Analysts at China’s biggest investment bank CICC said they are candidates for benchmark index inclusion.

Hang Seng Indexes Company, the city’s index compiler, will publish its quarterly review later today. The constituent changes will take effect from March 4, it said in a notice last month. Li Auto and WuXi AppTec joined in December in the previous revision.

Elsewhere, major Asian markets traded higher, tracking overnight gains in US equities. The Nikkei 225 in Japan climbed 0.9 per cent and the Kospi Index in South Korea jumped 1.3 per cent, while the S&P ASX 200 in Australia added 0.7 per cent.