Stocks in Hong Kong Jump After China’s Market Regulator Takes Measures to Stabilize Market
Stocks in Hong Kong experienced a significant increase today after China’s Securities Regulatory Commission implemented measures to stabilize the market. The regulator suspended securities lending of restricted shares listed on mainland exchanges, adding to a slew of measures aimed at curtailing the market rout. At the same time, China Evergrande, a notable real estate company, lost a court case paving the way for liquidation.
Stock Market Rebound
The Hang Seng Index rose by 0.8% on Monday, after initially surging as much as 1.9%. Last week, the benchmark rebounded by 4.2% from its 15-month low. Among the notable indexes, the Tech Index rose by 0.5%, while the Shanghai Composite Index weakened by 0.9%.
Noteworthy companies experienced a positive trend in today’s market. Alibaba Group saw a 2.4% increase to HK$72.60, JD.com, an e-commerce peer, gained 2.2% to HK$93.35, and Baidu jumped 2.1% to HK$105.10. Other firms like China Unicom, Sinopec, and PetroChina saw gains of 2.4%, 2.5%, and 1.4%, respectively.
Additionally, Longfor and China Resources Land also saw gains of 0.3% and 2.9%, respectively. The positive trend for these companies was further supported by the lifting of restrictions on the purchase of large homes in Guangzhou, a city in southern Guangdong province.
Expert Analysis
According to Kevin Liu, a strategist at CICC, sentiment recovery is driving the current phase of the market rebound. However, Liu advised that “a true trend reversal requires more targeted policy catalysts”.
Evergrande Liquidation Case Impact
Although there was a market surge today, Hong Kong’s stock benchmark index has fallen by approximately 4.2% so far this month, making it the worst January since a 6.7% slide in the first month of 2020. A significant factor impacting the market gains was a court judgment that ordered indebted Chinese developer Evergrande to be liquidated.
Evergrande’s stock, symbolized by China Evergrande, plummeted by 21% to HK$0.163. The Hong Kong court’s decision was made after the developer failed to present a satisfactory plan to repay its creditors for the past 18 months. Trading for Evergrande’s unit, Evergrande New Energy Vehicle, and its property management firm, Evergrande Property Services, were both halted after the judgment was announced.
Concerns Surrounding Chinese Biotech Firms
WuXi Biologics, a prominent Chinese biotech company, faced market turbulence as its shares plunged by 5.7% to HK$23.15 today. The stock has faced significant challenges after a proposed US legislation alleged ties between WuXi Biologics’ CEO, Chen Zhisheng, and the Chinese military. WuXi Apptec, a sister company of WuXi Biologics also implicated in the bill, experienced a drop of almost 11% to HK$57.75.
Sentiment and Economic Outlook
Sentiment in the market is expected to be cautious in the coming days, amidst potentially weak economic data. Economists tracked by Bloomberg predict that Chinese manufacturing will continue to contract in January, marking the fourth consecutive month. Additionally, an official report on January 31 will provide further insights on the manufacturing sector. Meanwhile, industrial profits in China fell by 2.3% in 2023, marking the second year of decline.
On the global front, the Federal Reserve is expected to maintain its key interest rates at its first policy meeting of the year. Odds calculated from Fed fund futures contracts compiled by CME Group indicate that no changes to the benchmark rates are expected at this meeting.
Other Regional Markets
Besides the Hong Kong market, other major key Asian markets also experienced favorable movements. The Kospi in South Korea advanced by 0.9%, the S&P/ASX 200 in Australia added 0.3%, and Japan’s Nikkei 225 increased by 0.8%.
