Chinese stocks broke a two-day losing streak as traders hoped for fresh stimulus on weak economic data and an end to the US-China trade impasse.
The Shanghai Composite gained 1.9 per cent on Wednesday to end at 2,936.06, while the CSI 300 of large stocks in Shenzhen and Shanghai rose 2.2 per cent to finish at 3,725.33.
Hong Kong’s Hang Seng also rose, ending up 0.58 per cent to 28,286.33, after a 1.5 per cent loss on Tuesday.
Foreign money also pumped up mainland benchmarks. Foreign traders bought more of mainland stocks than they sold for the first time in seven trading days. Foreign investors bought 907.5 million yuan (US$132.2 million) worth of mainland-traded equities through the exchange links with Hong Kong.
On Tuesday, overseas traders sold a combined 10.9 billion yuan of Chinese stocks, the most since at least December 2016.
The day was dramatically different than Tuesday, when Asian equities extended the global sell-off of stocks, as investors sought shelter in safe havens from the escalating US-China trade war.
But overnight, US President Donald Trump softened his tone on the US-China trade war. He said there is a “dialogue ongoing” with Beijing and that the situation would turn out “extremely well”.
Meanwhile, China on Wednesday morning posted weaker-than-expected economic data.
April retail sales were the lowest since May 2003. Sales rose 7.2 per cent year-on-year, below the estimated 8.6 per cent increase. Those from January to April rose 8 per cent year-on-year, also below the estimated 8.4 per cent.
China’s industrial production for April – the output of the industrial sectors in China’s economy, including manufacturing – fell to 5.4 per cent, from 8.5 per cent in March. Within that, the manufacturing sector rose by 5.3 per cent year-on-year, down by 8.5 per cent from last month.
Despite evidence of a suffering economy, mainland traders were buoyed by expectations of fresh stimulus by Beijing.
“The market is mainly held today by comments from Donald Trump and the fact that, despite the economic data not being very good, the market expects there will be more chance for stimulus measures from the government, because the economy slowed down in April and the trade war is still affecting it,” said Kenny Tang Sing-hing, chief executive of China Hong Kong Capital Asset.
“There is speculation [that Beijing] will cut the reserve requirement rate to improve liquidity,” he said. “New loans and liquidity in April has been deteriorating and the economic figures reflect this news.”
According to Tang, markets will continue to be volatile and dependent on news for the remainder of the week, but without too much downside. The Hang Seng “has already dropped a lot over the past week and the market is still positive there will be some sort of deal,” he said, predicting a lowest level of 28,000. Shanghai, meanwhile, will hang around 3,000 without dipping past it, he said.
Consumer stocks benefited from the upwards movement and they were the best performing sector in China.
Alcohol makers posted large gains. The second-largest distiller, Wuliangye Yibin, hit its highest level since April 9 of 110.15 yuan, jumping 7.2 per cent. Liquor king Kweichow Moutai rose 4.75 per cent, Luzhou Laojiao breached the daily limit of 10 per cent and Foshan Haitian Flavouring and Food rose 5.13 per cent.
In Hong Kong, health care led the way, with Sino Biopharmaceutical as one of the top movers, gaining 3.36 per cent.
The top mover on the bourse, however, was the world’s largest pork producer WH Group. It shot up 5.14 per cent in its biggest gain this month. The company, which owns the US’ Smithfield Foods, has been hit by the trade war alongside the outbreak of African Swine Fever, losing 32 per cent in its share price last year, and has previously called for an end to the tensions.
Both Tencent and Alibaba report earnings tonight.
More from South China Morning Post:
This article China, Hong Kong stocks gain on trade, stimulus hopes first appeared on South China Morning Post