Hong Kong stocks complete four-week rally on China easing bets while Evergrande tempers bond default risks

Hong Kong stocks logged the biggest gain in eight months as property developers surged on China policy easing bets. Evergrande jumped on media reports that it has paid a bond interest to offshore investors.

The Hang Seng Index rose 3.1 per cent this week to 26,126.93, the most since the opening week of February to complete a four-week rally. The Hang Seng Tech Index advanced 6.9 per cent, the most in eight weeks. The Shanghai Composite Index closed 0.3 per cent weaker at 3,582.60.

Longfor Group rose 6.6 per cent, while China Resources Land added 3.8 per cent and Sunac China surged 8.4 per cent. A measure of property stocks in Shenzhen rose by about 4.7 per cent in the past two days, the best back-to-back win in seven weeks.

The China Banking and Insurance Regulatory Commission said on late Thursday that authorities will support first-time homebuyers and banks will start easing mortgage financing, following a report showing home prices shrank last month. It however pledged to retain the broader curbs on sector leverage.

“The concerns on the property industry seems to have eased with speculative capital flowing back into them,” said Alvin Cheung, associate director at Prudential Brokerage in Hong Kong. Investors should remain vigilant because China still keeps a tight control on the sector, he added.

Stocks also benefited from easing concerns about property debt default. China Evergrande was said to have paid the US$83.5 million interest to offshore bondholders before a 30-day grace period expires on Saturday, the state-run mainland newspaper Securities Times reported. Reuters also reported the same.

Traders were seen loading up property stocks earlier this week after a mainland media report said two state-owned lenders were speeding up loans for developers and mortgages for homebuyers.

China Evergrande rose 4.3 per cent while its Evergrande Property Services Group gained 1.7 per cent. They advanced despite a dispute with Hopson Development over the botched US$2.6 billion asset deal between the two groups over payment differences.

Energy stocks fell as oil prices retreated. The National Development and Reform Commission on Friday said it was studying specific measures to stop coal producers from making huge profit and to stabilise prices at a reasonable range for the long term. PetroChina lost 3.7 per cent in Hong Kong and Jizhong Energy slumped 8.7 per cent in Shanghai.

Sinocat Environmental Technology declined 6.1 per cent to 66.58 yuan on its first day of trading in Shanghai.