China and Hong Kong stocks rebound on expectations sell-offs are overdone amid virus outbreak

China’s stocks rebounded from a sell-off on optimism that the impact of the coronavirus on economic growth will be short-lived and the decline was excessive.

The Shanghai Composite Index rose 1.3 per cent, or 36.68 points, to 2,783.29 on Tuesday after a 7.7 per cent plunge a day earlier. The technology-heavy ChiNext gauge of small-caps rallied 4.8 per cent, signalling a quick recovery in the appetite.

Meanwhile, Hong Kong’s Hang Seng Index rebounded for a second day, gaining 1.2 per cent to 26,675.98.

While the numbers of the confirmed coronavirus cases and fatalities are still on the rise, HSBC Jintrust Fund Management says the panic selling offered a good buying opportunity and Western Asset, a unit of Legg Mason, argues that the impact on China’s economy will be short-lived, given the ample policy manoeuvre in the Asian nation.

“Even in the worst-scenario case, the epidemic is expected to have an inflection point in summer,” said Min Liangchao, a Shanghai-based strategist at HSBC Jintrust Fund. “The novel coronavirus will dampen market sentiment, but derail the uptrend on the market in the medium term. Panic selling creates a very good buying opportunity. The valuations of A- and H-shares will be more attractive after the pullback,” referring to the stocks trading on the mainland and the city.

Overseas investors were undeterred by the pandemic, loading up on Chinese stocks through the Stock Connect with Hong Kong for a second day in the Lunar New Year. They spent almost 8 billion yuan (US$1.14 billion) buying the stocks on Tuesday, following the purchase valued at 18.2 billion yuan a day earlier.

Technology and health care companies topped the list of gainers. Ourpalm and Wuhu Sanqi Interactive Entertainment Network Technology Group both jumped by the 10 per cent daily limit on expectations that the travel restrictions amid the outbreak of the coronavirus will boost demand for online games.

Kweichow Moutai, the world’s most valuable distiller, added 3.4 per cent to 1,038.01 yuan after Jefferies said leading players in the consumer sector became cheaper after the decline and business in the mainland would gradually return to normal soon, assuming that the epidemic is contained in the first quarter.

In Hong Kong, Alibaba Group Holding, the e-commerce giant and owner of the South China Morning Post, climbed 4 per cent to HK$213.20. Meituan-Dianping, the Chinese food delivery giant, rose 1.5 per cent to HK$101.

Tongfang Kontafarma Holdings surged 55 per cent to 20.4 Hong Kong cents after it said in a filing to Hong Kong’s bourse that it has been notified by the authority that its product chloroquine phosphate has been tested and proved to have certain curative effect in combating the novel coronavirus.

Macau gaming operators plunged after the Hong Kong Economic Journal said all the casinos in the former Portugal colony will be shut for half a month to stem the spread of the coronavirus, citing chief executive Ho lat-seng.

Sands China lost 2.6 per cent to HK$37, Galaxy Entertainment Group retreated 2.3 per cent to HK$51.90 and MGM China Holdings slid 3.3 per cent to HK$10.60.