Alibaba, Meituan sustain Hong Kong stock rebound as Fed buoys markets with dovish stance through 2023

Zhang Shidong
·3-min read

Hong Kong stocks rose, pushing the benchmark index to its longest winning streak in a month, after the Federal Reserve signalled borrowing costs will remain near zero through at least 2023 and eased market concerns about inflation risks.

The Hang Seng Index climbed 1.3 per cent to 29,405.72 at the close. The four-day advance totalling 2.3 per cent marked the longest streak since February 17 when the index peaked this year. The Tech Index jumped by as much as 2.9 per cent. Alibaba Group Holding, Sunny Optical and Meituan climbed by at least 3.7 per cent.

Baidu and Bilibili are among Chinese tech stocks making a beeline to sell shares in Hong Kong, a trend that the Hong Kong Monetary Authority (HKMA) last week said will help attract inflows and shore up the local currency.

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The Shanghai Composite Index added 0.5 per cent to close at a two-week high. All major markets in Asia all rose except in Australia, with gauges in Japan and South Korea adding at least 0.6 per cent. US equities closed at record highs in overnight trading.

Stocks rose even as 10-year Treasury yield climbed to 1.71 per cent on Thursday, touching the highest level since January last year. Fed Chairman Jerome Powell said policymakers will be tolerant of inflation and the accommodative policies will stay for an extended period of time. He also dismissed the concern about higher bond yields, saying the increase was not disorderly.

The Fed’s “latest economic projections show that the impact from the gigantic fiscal stimulus on GDP growth and inflation will come through mostly in 2021, and revert to long term trend in 2022 and beyond,” said Tai Hui, a strategist at JPMorgan Asset Management in Hong Kong. “The market reaction suggests investors are satisfied with the Fed’s explanations for now.”

The Fed’s decision is in line with market expectations and liquidity in the local banking system remains ample, the HKMA said in a statement on Thursday after the FOMC meeting.

Explainer: What is behind China’s US$1.4 trillion stock market rout

Rising debt yields have unsettled investors over the past weeks, sparking fear that the Fed will start to put a lid on easy credit that has pushed global stock prices to record highs. The shakeout in bond prices has already spurred a shift to value stocks away from technology and consumer companies with frothy valuations.

Sunny Optical surged 9.5 per cent to HK$195.80 after reporting a 22 per cent increase in 2020 earnings. The result exceeded analysts’ estimates by 13 per cent. The stock’s 20-plus per cent pullback from a February high was overdone, according to Citigroup.

Alibaba, the owner of this newspaper, rallied 4.9 per cent to HK$233.60, the biggest gain since January 20. Rival Pinduoduo’s US-listed securities tumbled 7.1 per cent overnight after founder Colin Huang Zheng, 41, stepped down as chairman on the same day it reported active users surpassing those on the e-commerce platforms of Alibaba and JD.com.


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