Hong Kong, mainland stocks make steady gains as investors look ahead to China’s annual political meetings

Hong Kong stocks ended Monday slightly higher following gains in oil majors while the Chinese government’s announcement to speed up infrastructure investment in the impoverished western region ahead of it annual legislative sessions boosted mainland stocks.

The Hang Seng Index rose 0.6 per cent to 23,934.77 on the back of increases in CNOOC, PetroChina and Sinopec, which rose 7.8 per cent, 5.5 per cent and 4 per cent, respectively.

The blue chips benefited after crude oil rose to more than a one-month high. Oil prices were supported by ongoing output cuts and signs of gradual recovery in demand for fuel as more countries eased curbs imposed to contain the coronavirus pandemic.

“The worst may have passed,” said Kenny Tang Sing-hing, chief executive at China Hong Kong Capital Asset, noting that China’s post-pandemic policies will facilitate market recovery. He added that the Hang Seng Index faces resistance in breaking through the 25,000 level as investors await new policies likely to be announced later this week during the Two Sessions aimed at boosting the economy.

The Shanghai Composite Index swung between gains and losses. It eventually closed 0.2 per cent higher at 2,875.42 following the government’s initiative to speed up infrastructure development in the western region. The government said it aims to establish energy production bases, accelerate urbanisation and speed up infrastructure construction in Sichuan, Gansu, Shaanxi and Qinghai provinces.

Property stocks also contributed to the gains after housing prices in 70 major cities in the mainland ticked up in April.

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Wang Jianhui, chief general manager of research department at Capital Securities, said the stock markets were behaving just like they have in the past before the annual legislative meetings. But he added that investors were treading with caution because of the impact of the coronavirus on the economy.

In Hong Kong, tech stocks were hammered after the US tightened controls over Chinese tech giant Huawei’s use of American technology and components. Sunny Optical Technology plunged 11.4 per cent and AAC Technologies Holdings fell 6.2 per cent as both these companies supply components to Apple and Huawei.

Chip maker SMIC shed 6.4 per cent after rising as much as 7.3 per cent in the morning. The decline came even after the company said that it had received a cash injection of US$2.25 billion from two state-backed funds to support advanced-chip making.

In the mainland, Kweichow Moutai, the world's most valuable liquor company, added 2.5 per cent and closed at an all-time high. In Shenzhen, ZTE dropped 0.9 per cent.

Alan Li, portfolio manager at Atta Capital, said that the US restrictions have increased concerns about Huawei’s ability to make and launch new gear. He pointed out to Taiwan Semiconductor Manufacturing Co, which is said to have stopped new orders from Huawei because of pressure from Washington.

Meanwhile, Hang Seng Indexes Company, responsible for compiling the benchmark stock index in Asia’s third-largest stock market, said that companies with secondary listings and unequal voting rights will be included in the index for the first time. The most important revamp of the 50-year-old Hang Seng Index since the inclusion of H-shares in 2006 paves the way for technology giants such as Xiaomi and Alibaba Group Holding, the owner of this newspaper, to be included in the index.

If the changes are approved, the new stocks will be included in August at the earliest.