Hong Kong stocks extend best run since January as Alibaba, Cathay Pacific plans fuel advance while China’s markets erase gains

Hong Kong stocks advanced as corporate activity involving Alibaba Group and Cathay Pacific intensified in response to the Covid-19 pandemic, while China’s economic recovery strengthened.

The Hang Seng Index rose 0.6 per cent to 24,542.26, after rising for three straight weeks for its longest winning run since January. The CSI300 index, which tracks the biggest companies on Shanghai and Shenzhen bourses, fell 0.8 per cent to 4,755.49, erasing earlier gains.

Alibaba Group Holding dominated news with its purchase of China’s largest hypermarket operator, while its affiliate Ant Group’s stock offering plan in Hong Kong is deliberated on Monday.

“The markets opened higher because Chinese regulatory bodies have allowed Ant Group to be listed in China” and Hong Kong, said Louis Tse Ming-kwong, managing director of Wealthy Securities. “Now it’s up to the Hong Kong stock exchange to arrange” the second leg of the IPO in the city, he added.

Market sentiment was also lifted by hopes that the US could introduce more economic measures soon, said Stanley Chan, director of research at Emperor Securities. However, economic data from China “was a bit weaker than market expectations, leading to a drop in the mainland markets,” he said.

Markets across Asia-Pacific chalked up gains with Japan’s Nikkei 225 rising by 1.1 per cent and Australia’s S&P/ASX 200 adding 0.9 per cent, on the back of progress in US stimulus talks.

China’s economy grew by 4.9 per cent in the third quarter on year, versus 3.2 per cent in the preceding quarter, the government said on Monday. While the pace was slower than the 5.5 per cent consensus forecast, other data pointed to a robust rebound. Industrial production grew by 6.9 per cent in September from a year earlier, while retail sales grew 3.3 per cent, both exceeding market expectations.

“China’s return to economic dynamism at a pace faster than its peers is the first step towards a global recovery,” China Renaissance analysts led by Bruce Pang said in a note on Monday. China will act as an “important engine and vital stabilizer” of the global economy as other major economies struggle with the pandemic, they said.

Gains in Chinese stocks this month have pushed the market within 6.2 per cent of its previous peak in January 2018 on Friday. The rally in prices, however, has lifted the market valuation to 18 times earnings, a level that has proved to be hard to sustain in the past.

Fintech giant Ant Group wins approval from China’s securities regulator for jumbo IPO in Hong Kong

In Hong Kong, financials led gains with ICBC rising 3.6 per cent while HSBC gained 2.5 per cent. AAC Technologies, which derives 40 per cent of its revenues from Apple, rose 2.5 per cent.

Alibaba, the owner of this newspaper, gained 1.1 per cent to HK$297.20, after earlier hitting an intraday record of HK$299.40. Its affiliate Ant Group has won approval from China’s top securities regulator for a review of its jumbo initial public offering plan in Hong Kong.

The e-commerce giant also announced it will pay HK$28 billion (US$3.6 billion) to take control of China’s largest hypermarket operator Sun Art Retail Group from the French billionaire Mulliez family. The deal will double its effective stake to 72 per cent. Sun Art surged 19 per cent to HK$9.45, the most since April 2015.Alibaba is offering to buy the rest of the shares at HK$8.10 each or 21 per cent above its Friday closing price.

Cathay Pacific ‘optimistically’ predicts flying less than a quarter of pre-coronavirus flights for next eight months

Cathay Pacific rallied as much as 2.6 per cent before paring gains to 0.3 per cent to HK$5.80, bringing its three-day upturn to 9.2 per cent.

The carrier, fresh from the optimism surrounding Hong Kong’s travel bubble plan with Singapore, is said to be preparing for a major revamp with job cuts to survive the industry slump.

Employees will learn their fate before Friday but the Hong Kong government, which extended a bailout to Cathay Pacific in June, is trying to pressure the company to offer more generous exit packages to the laid-off workers, multiple sources told the Post.

However, in the company’s September business update released on Monday, the airline anticipated in the first half of 2021 it would fly less than a quarter of the schedule it did before the virus brought global travel grinding to a halt, hinting at its future staffing requirements next year and beyond.

In mainland markets, Apple suppliers gained as millions of Chinese consumers signed up for the US smartphone giant’s new handset series. GoerTek rose 2 per cent. Luxshare Precision rose as much as 3.4 per cent, before paring gains to 0.2 per cent. Lens Technology gained as much as 4.4 per cent before paring gains to 0.2 per cent.

One stock traded for the first time in Hong Kong, while two made their debuts in mainland China.

Property services firm Excellence Commercial Property & Facilities gained 3 per cent to HK$11 from its IPO price of HK$10.68.

In Shanghai, household appliance manufacturer Zhejiang Sanfer Electric Co Ltd rose 44 per cent to 34.98 yuan from its offer price of 24.29 yuan.

In Shenzhen, Guangdong Dongpeng Holdings, which manufactures ceramic tile products, rose 44 per cent to 16.34 yuan from its IPO price of 11.35 yuan.