President Xi Jinping’s keynote address in Shenzhen failed to fuel China’s stock rally, leaving the market short of a five-year high, as traders’ expectations were dashed by the lack of policy details from his speech. Shenzhen’s hometown champion Tencent Holdings rose to a record high, keeping key indices in Hong Kong in positive territory.
Shanghai’s Composite Index fell by 0.6 per cent while the benchmark on the Shenzhen exchange fell by the same percentage, and the CSI 300 index that tracks both markets fell 0.7 per cent. The three gauges were in negative territory throughout Xi’s nearly hour-long speech in Shenzhen.
On the Hong Kong exchange, the Hang Seng Index rose 17.4 points, or by 0.07 per cent, to 24,667.09, held up by a 3 per cent jump in Tencent’s shares. The China Enterprise Index, which tracks Chinese companies in Hong Kong, rose 0.4 per cent, also propped up by Tencent.
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China’s market capitalisation rose to a record US$10.08 trillion on Tuesday in a rally stoked by expectations that Xi would unveil some sweeping measures to deepen the Chinese government’s economic reforms after 40 years of having Shenzhen as China’s special economic zone, which heralded the country’s experiment with market reforms and liberalisation. During his address, Xi heralded more reforms in the southern Chinese city, and urged local authorities to foster better integration of the Greater Bay Area to link Hong Kong, Macau with the nine cities in Guangdong province.
Shenzhen will continue its role as a pioneer in China’s economic reforms, being exposed to more autonomy and favourable policies that will power further opening-up and innovation, the Chinese president said.
“The new development pattern is not a closed domestic cycle,” said Xi, making it clear he wants a “new open economic system.”
The Chinese president urged the development of intercity rail links to enable the youth of Hong Kong and Macau to better integrate with the Greater Bay Area. Before the president spoke, shares of Hong Kong’s subway operator MTR jumped by as much as 3.8 per cent in their biggest intraday advance since June. The stock gave up most of those gains, closing 0.5 per cent higher at HK$39.30.
Shares of Shenzhen-based Tencent, China’s largest games publisher and social network operator, rose 3 per cent to a record close of HK$573.50 on the Hong Kong exchange. That gives it HK$5.5 trillion (US$688 billion) in market value, larger than Warren Buffett’s Berkshire Hathaway as the world’s eight-largest company. Alibaba Group Holding, this newspaper’s owner, closed 1.9 per cent higher at a record HK$297.60, giving the company US$835 billion in value in fifth place.
Still, there were more losers than gainers in both of Hong Kong’s key gauges. HSBC led declines on the Hang Seng Index with a 3 per cent drop. Cnooc, China’s largest offshore oil explorer, fell 3.1 per cent, leading the losses on the China Enterprises Index.
China Evergrande Group slumped by 17 per cent to HK$16.06 in Hong Kong. The world’s most indebted developer, Evergrande was seeking to raise HK$8.43 billion by selling 490 million shares in a top-up placement. The offer price between HK$16.50 and HK$17.20 each implies an as much as 15 per cent discount to the stock’s last closing price.
Geely Automobile Holdings, China’s largest private carmaker and the biggest shareholder of Daimler, added 2 per cent to HK$16.74, making it among the best performers on the Hang Seng Index. China’s vehicle sales rose 7.4 per cent from a year earlier for a third consecutive monthly gain in September, according to the data by the industry association.
Declines were also recorded in other Asian markets that were trading at the same time, from Australia to Japan and South Korea. The Topix index fell 0.3 per cent in Tokyo while the Kospi index dropped by 0.9 per cent in Seoul, tracking the overnight sell-off in Wall Street.
The US markets were spooked by setbacks in the trials of experimental vaccines for treating the coronavirus pandemic. Eli Lilly said on Tuesday that enrolment in a government-sponsored clinical trial of its antibody therapy had been paused out of safety concerns, less than 24 hours after Johnson & Johnson halted research on its experimental vaccine because a study volunteer had fallen ill. The snag heightens fears that the sprint to find a medical breakthrough to contain the coronavirus pandemic may turn out into a long slog.
Countries across Europe also stiffened curbs to try to contain the resurgence of the pandemic. New cases increased at the fastest pace since April in Germany, the Dutch prime minister ordered a partial lockdown and France reported a spike in patients that need intensive care. Meanwhile, prospects for the US government’s fiscal stimulus before next month’s presidential election waned.
“With Covid-19 in the air, local investors appear to be more concerned looking over their shoulder for Covid-19 headlines than buying dips as those scare heads are likely to weigh on broader markets,” said Stephen Innes, a strategist at AxiCorp.
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