Hong Kong, China stocks advance on expectations Beijing will boost liquidity to lessen coronavirus hit to economy

Hong Kong and China stocks posted broad gains Tuesday, on expectations Beijing will add further liquidity into the financial system to help lessen the blow of the deadly coronavirus.

The Hang Seng Index rose 1.3 per cent to 27,583.88, with 42 of the 50 constituent members advancing.

In the broader market, hotpot stocks rebounded, after seeing losses Monday following news that nine members of family became infected with the novel virus when they gathered at a hotpot restaurant.

Index heavyweight Tencent jumped 2.1 per cent to $409, and Macau casino stocks also posted strong gains, with investors seeing bottom fishing opportunities as local stocks are far cheaper than US equities that hit fresh highs.

Meanwhile, the Shanghai Composite Index rose for the sixth straight session, advancing 0.4 per cent to 2,902.

In mainland markets, sectors that rose included glass, by 3.5 per cent, Apple supply chain, by 2.2 per cent, wireless headsets, by 2 per cent, liquor, by 2.5 per cent, and steel, by 2.1 per cent.

The CSI 300 of large cap stocks on the Shanghai and Shenzhen exchanges rose 0.9 per cent to 3,952.46.

Apple AirPod supplier Luxshare Precision Industry closed ahead by 5.3 per cent at 45.50 yuan.

Kweichow Moutai, the world’s most valuable liquor company, rose nearly 3 per cent to 1,098 yuan.

“The market is driven by policy expectation,” said Kenny Wen, wealth management strategist at Everbright Sun Hung Kai. The central bank may reduce the required cash banks must hold in reserve and make borrowing by private companies easier.

“Liquidity overshadowed the worry of virus. And US stocks performed so well, also supporting investment sentiment,” he added.

Shares of Alibaba, China’s e-commerce giant, suffered a scare after Bloomberg reported it had been blocked from trading on the Stock Connect, the trading link between the mainland and Hong Kong.

The stock rapidly fell 2.4 per cent to a low of 207.20, before recovering to finish down 0.2 per cent at HK$212.20.

Alibaba has a secondary listing in Hong Kong after its US listing and dual classes of shares.

To date, no such stock trades on the Stock Connect. But, in a breakthrough last year, Meituan Dianping and Xiaomi were made accessible to southbound traders on the link. They have dual classes of shares – which allow top executives and founders to maintain control – but listed their IPOs in Hong Kong.

The Hong Kong Exchanges and Clearing, the stock market operator, declined to comment on the Bloomberg story, but in a statement made clear it hopes stocks with secondary listings will eventually be on the Stock Connect.

“Currently, WVR [weighted voting rights] companies with a secondary listing are not included in southbound trading of Stock Connect. There is no inclusion precedent for WVR companies with a secondary listing, but we look forward to discussing the potential for this with relevant parties in the future.”

Investors in Hong Kong looked for virus-battered stocks, as they closely watched for the latest news on containment efforts, China’s return to work and possible treatments. The death toll has now climbed above 1,000.

“If there’s a positive outcome of these testings or vaccine, I think the market can go back to 30,000 this year,” said Louis Tse Ming-kwong, managing director of VC Asset Management.

Meawwhile, Geely Auto jumped 5.7 per cent to HK$14.48, after announcing plans to combine business with its Swedish affiliate Volvo Cars.

Guotai Junan Securities rated the stock “accumulate,” with a target price of HK$16.50.

China’s largest hotpot chain Haidilao International Holding rallied 3.9 per cent to HK$31.75, after falling 4.8 per cent on Monday after the news about the sickened family.

Rival restaurant chain Xiabu Xiabu rose 3.3 per cent to HK$8.17. On Monday, it tumbled 7.9 per cent.

Yihai International, which makes condiments for hotpot dishes, rose 6.7 per cent to HK$49.60. On Monday, it declined 2.7 per cent.

Among casinos, Sands China rose 2.1 per cent to HK$39.05, while Galaxy Entertainment Group rose 2.5 per cent to HK$54.60.

Additional reporting by Iris Ouyang and Kathleen Magramo