Hang Seng Index surges with Asian stocks on stimulus bets as Trump concedes defeat, Chinese telecoms slammed on index deletion

Martin Choi
·4-min read

Hong Kong stocks rallied along with other Asian markets after President Donald Trump acknowledged his defeat in the November elections for the first time and pledged to ensure a smooth transition of power to Joe Biden. Chinese telecoms stocks slumped.

The Hang Seng Index gained 1.2 per cent to 27,878.22, bringing the rally in the first week of 2021 to 2.4 per cent. The Shanghai Composite slipped 0.2 per cent after a four-day advance, reducing the appreciation this week to 2.8 per cent.

Japan’s Nikkei 225 rose 2.4 per cent on Friday while South Korea’s Kospi added 4 per cent and Australia’s S&P/ASX 200 edged up 0.7 per cent.

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Geely Auto paced gainers, shooting up 19.6 per cent to HK$33.25 while Hong Kong Exchanges & Clearing or HKEX rose 2 per cent to HK$452.

Trump said his focus “now turns to ensuring a smooth, orderly and seamless transition of power”, after the US Congress certified the election result on Thursday following a riot by his supporters that killed four. The Democrats also took control of the Senate after the Georgia run-off, easing the path for US stimulus spending and Biden’s legislative agenda.

“The Democrats have completed a clean sweep” despite hurdles created by Trump supporters, said Keith Wade, chief economist at Schroders. “This has significant implications for spending, taxes, economic growth and interest rates.” An enhanced spending bill could generate an extra US$900 billion fiscal boost, he said.

Geely Auto surged after Reuters said the carmaker is planning a venture with internet search engine company Baidu to make smart electric vehicles, a field littered with Tesla challengers. Baidu is also said to be planning to raise at least US$3.5 billion in a secondary listing in Hong Kong as soon as the first half of this year, Bloomberg reported.

The news signalled the continued trend of US-listed Chinese companies hedging their listing status by seeking a flotation in Hong Kong. This has helped fuel a late surge in HKEX in the closing week of 2020 into the new year.

Gains were limited by steep losses in three Chinese telecoms stocks after major index compilers – MSCI, FTSE Russell and S&P Dow Jones Indices – decided to remove the trio from their benchmarks before Monday trading. That came after the New York Stock Exchange proceeded with a plan to delist their American depositary shares.

The MSCI said it would drop the Hong Kong-listed shares of China Mobile, China Telecom and China Unicom from its family of MSCI ACWI indices and MSCI China All Shares indices at the close of business on Friday, following further guidance from the Office of Foreign Assets Control, a unit within the Treasury Department.

S&P Dow Jones Indices said on January 6 it would remove the telecoms trio from its stock and bond indices before the start of trading on Monday. FTSE Russell will also do the same to some of its stock and other associated indexes on Monday.

China Unicom pared losses of 0.9 per cent to HK$4.41, after plunging as much as 11.2 per cent earlier. China Mobile dropped 4.2 per cent to HK$41.50. China Telecom fell 3.5 per cent to HK$1.96. China Unicom has fallen 0.9 per cent this week, while China Mobile has lost 6.1 per cent. China Telecom has plunged 8.8 per cent. The three mobile carriers have lost a combined HK$59.16 billion in market value this week.

Chinese steelmakers advanced after getting a stock upgrade. Hong Kong-listed shares of Angang Steel gained 4.3 per cent to HK$3.67, while its Shenzhen-listed shares gained 4.9 per cent to 3.24 yuan. CCB International raised the stock to outperform.

Baoshan Steel rose 3.1 per cent to 6.56 yuan in Shanghai. JPMorgan upgraded the stock to overweight with a target price of 7 yuan.

In China, local authorities have urged residents not to make “unnecessary” trips back to their hometowns for the Lunar New Year holiday amid fresh coronavirus outbreaks in northern Hebei province which borders the capital Beijing. The province has recorded more than 230 cases this year, with the capital Shijiazhuang locked down .

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