Hong Kong, China stocks gain on signals of more stimulus from People’s Bank of China to boost economy pounded by coronavirus

Kathleen Magramo

Mainland and Hong Kong stocks netted small gains Thursday as China’s central bank said it will boost loan access and use other stimulus tools to help the coronavirus-hit economy.

The Shanghai Composite Index closed with a gain of 0.1 per cent to 2,991.33. The CSI 300 gauge of large cap stocks traded in Shanghai and Shenzhen rose 0.3 to 4,084.88. Both snapped three-day losing streaks.

The Hang Seng Index rose 0.3 per cent to 26,778.62. It turned up in afternoon trading, after China’s central bank vowed to release long-term liquidity in the market.

The People’s Bank of China will continue to use special loans to small and medium banks and conduct open market operations, standing loan facilities, and medium-term loan facilities to boost liquidity, said Liu Guoqiang, the central bank’s deputy governor.

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But trading sentiment was more bearish in Hong Kong earlier on news that the number of new coronavirus cases in South Korea surpassed that of mainland China for the first time. Seoul reported that 505 people were infected with Covid-19, while China added 433 new cases.

There are lots of emotions in the pot out there in markets, said Alan Li, portfolio manager of Atta Capital.

“People in China tend to believe virus to be under control while people in other markets are afraid of further spread outside China. Hong Kong is the middle of them – extremely bullish and bearish here,” Li said.

“A-share investors focus on stimulus policy and the beneficial sectors,” he said, referring to Chinese shares. “We still see very strong fund inflow to support the market. However, high valuation of such strong sectors like semiconductor and tech-related make long funds feel uncomfortable and [prompt them to] shift to safety choice like infrastructure and construction.”

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On the mainland, the food industry jumped nearly 4 per cent, according to a gauge compiled by data provider Xuangubao.

Liquor distiller Kweichow Moutai advanced 1.3 per cent to 1,087.39 yuan.

Muyuan Foodstuff, China’s second-largest pork producer, advanced 2.2 per cent to 118.60 yuan.

Three Squirrels, China’s largest nut snack producer, shot up 3.6 per cent to 66.50 yuan.

On the other hand, Apple suppliers slipped. GoerTek dipped 3.2 per cent to 24.13 yuan, while Luxshare Precision fell 1.8 per cent to 46.76 yuan. Both make Apple AirPods.

In Hong Kong, property company Wheelock said it will distribute its stakes in Wharf REIC to shareholders, according to an exchange filing. Wharf REIC is in the process of being privatised by its parent company Wheelock

Wheelock’s shares surged 39.7 per cent to HK$66. Wharf REIC plunged 6.2 per cent to HK$37.70.

Mainland banks were among top gainers in Hong Kong.

The Industrial and Commercial Bank of China advanced 2.3 per cent to HK$5.46 and China Construction Bank gained 1.9 per cent to HK$6.44.

Bullish investors also got a boost from mainland health authorities saying they expect the coronavirus outbreak to be contained by April, said Louis Tse Ming-kwong, managing director of VC Asset Management.

“This gives the whole situation a bit more direction. The market has been sold down quite a lot, the news that the epidemic could be eased by April gives it some excuse for a rebound,” Tse said.

Meanwhile, casino operator Galaxy Entertainment fell 2.2 per cent to HK$52.5. Budweiser Brewery APAC declined 1.2 per cent to HK$24.00. Both reported results that disappointed investors.

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Vanguard’s investment strategy group estimates that the coronavirus outbreak will cut 0.5 percentage point of growth from China’s economy this year – roughly 534 billion yuan in goods and services not produced, or at least delayed.

Economic activity may not return to normal until early in the second quarter as mass quarantines and business shutdowns continue, Vanguard predicted.

“In this scenario, we’d expect a meaningful decline in economic output from the fourth quarter of 2019 and a sharp, V-shaped recovery afterward. There would be moderate supply-chain disruptions around the globe,” Vanguard analysts said in a fresh note.

Its impact will be driven by the reach and duration of the virus, fear of consumers and businesses, and government responses to the outbreak, they added.

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