Bargain hunters who gambled on telecom, Hong Kong property and Cathay Pacific Airways stocks were rewarded Thursday, as they stepped beyond the caution that dominated Hong Kong and mainland China markets.
Cathay Pacific Airways shot up 5.7 per cent. That was its second straight day of gains, after it fell to a 10-year low earlier in the week when it got caught up in a firestorm connected to some of its employees’ participation in protests that have shaken Hong Kong.
Meanwhile, the telecommunications sector led gains on both the Hang Seng Index and the Shanghai Composite Index.
But caution remained deep in the markets, analysts said.
The Hang Seng Index ended ahead 0.76 per cent at 25,495.46 points, but dipped earlier below 25,000 – its lowest level this year.
The Shanghai Composite Index gained a mere 0.25 per cent, closing at 2,816 points.
The caution reflected such things as poor economic data out of China and Germany, as well as the world’s largest gaming company, Tencent Holdings of China, warning of a difficult economic environment ahead. Protests in Hong Kong showed no signs of ending.
Meanwhile, the yield of US and UK 10-year government bonds dipped below those of shorter-maturity debt for the first time since the financial crisis. This marks an inversion of their usual relationship, which is often seen as signalling the potential coming of a recession. Investors in the US were spooked, and all the major indexes closed down overnight by around 3 per cent, spilling over a negativity into Asian markets.
“(The Hang Seng) responded to the sell-off [in the US] overnight, but the fact it managed to rebound back from below 25,000 shows there is bottom fishing, bargain hunting,” said Louis Wong Wai-kit, director of fund-management company Philip Capital Management.
Cathay was among those stocks flying high.
Part of the boost came after the Civil Aviation Administration of China said the airline had met its requirements about crew members. Earlier in the week, it banned any Cathay staff who had taken part in protests to fly in, out or through China, and required the carrier to provide a list of all crew flying on such routes.
Meanwhile, telecoms rose 6.25 per cent on the Hang Seng, led by China Unicom, the world’s third largest mobile provider. It gained 4.8 per cent on the Shanghai Composite, led by the company’s mainland business, China United Network Communications.
China Unicom posted a 16.3 per cent year-on-year increase in first-half net profit to 6.8 billion yuan (US$967.2 million), it said in a filing to the stock exchange after trading on Wednesday, and revenue fell 2.7 per cent to 144 billion yuan. Both figures were below estimates by analysts polled by Bloomberg.
The earnings, however, “show the 5G capex is not as huge as expected, which is seen as a positive for telecoms operators,” said Wong.
The company also said it is in talks with other mobile carriers, like China Mobile and China Telecom, to cooperate in building a 5G network, with joint investment to start next year.
Credit Suisse upgraded the company’s rating to “outperform” from “neutral.”
Property stocks in Hong Kong also rose over expectations of lower interest rates in the US because of the yield curve inversions, said Wong.
Among the key players, Sun Hung Kai Properties and Link Real Estate Investment each rose by 4 per cent, while CK Asset Holdings added 2.7 per cent.
Property, typically an indicator of sentiment in Hong Kong, had been performing poorly in recent weeks amid a downturn in the wider market due to escalating protests and a lack of progress in the US-China trade war.
Wong still expects traders to remain cautious this week, forecasting a resistance on the Hang Seng of 25,500 to 25,600.
The Shanghai Composite will hover around the 2,800 mark to end the week, with 2,820 to 2,830 serving as a resistance level, and 2,770 to 2,780 as a support level, he said.
More from South China Morning Post:
- Cathay Pacific Airways’ handover of crew details ‘satisfies mainland Chinese regulator’
- Cathay Pacific threatens staff with sack after Beijing draws line on Hong Kong protests
- Cathay Pacific’s majority shareholder pressed into condemning ‘violent’ Hong Kong protests
- China bans Cathay Pacific staff involved in Hong Kong ‘unlawful’ protests from mainland routes
- Is now a good time to buy Tencent stock? Momentum in online gaming, advertising would suggest so