Hong Kong stocks rallied Monday, after a big win by the city’s opposition camp in Sunday’s elections boosted hopes that violent protests may subside.
The Hang Seng Index 1.5 per cent to 26,993.04, with 47 of the 50 constituent stocks posting gains.
“The gains are highly related to the election results and the peaceful weekend,” said Alan Li, portfolio manager at Atta Capital.
Meanwhile, China stocks rose as well, with the Shanghai Composite Index climbing 0.7 per cent to 2,906.17. That snapped a three-day losing streak, as cyclical companies from steelmakers and cement producers to property developers surged.
The protests in Hong Kong have weighed heavily on market sentiment since they turned violent at the start of July, leading to sometimes surreal moments, such as when a man was set on fire and a police officer was shot with an arrow. The protests have pushed the city’s economy into a technical recession, adding to pain from the US-China trade war.
On the final election tally, the opposition camp won 17 out of 18 district councils, all of which had been under pro-establishment control.
Property developers and retailers such as Sa Sa International and jewellery sellers have seen their share prices clobbered, as all-important mainland tourism plunged.
On Monday, traders piled into such battered stocks as Sa Sa, a cosmetics chain, which gained 5.7 per cent to HK$1.84.
Property stocks were top gainers, with the Hang Seng property sub-index posting a 2.4 per cent increase.
Wharf REIC shot up. 4.7 per cent to HK$44.75, while. Sun Hung Kai Properties rose nearly 3 per cent to HK$114.20, and New World Development climbed 1.9 per cent to HK$10.54.
“We believe these election results could lead to less violence of the protesters, who should be quite happy with this set of results, and that should bode well for Hong Kong property stocks’ share prices in the near term,” said Raymond Cheng, head of Hong Kong and China research and Hong Kong and China Property at CGS-CIMB Securities.
“For Hong Kong property stocks, we like Sun Hung Kai Properties and New World Development. For landlords, investors may consider Swire Properties and Wharf REIC,” Cheng said.
China Mengniu Dairy rose 0.9 per cent to HK$29.65 after saying it has moved to buy Lion-Dairy and Drinks, an Australian-branded dairy company. That follows its step in September to buy Australia baby milk formula maker Bellamy’s for US$1 billion as part of its global expansion goals.
Index heavyweight Tencent jumped 1.6 per cent to HK$33.80, while giant insurer AIA climbed 3.6 per cent to HK$80.05.
Other factors for the Hang Seng jump were growing optimism that a partial trade deal will be agreed upon by Beijing and Washington, as well as excitement about the first day of trading on Tuesday of e-commerce giant Alibaba in Hong Kong in its secondary listing. (Alibaba is the parent company of the South China Morning Post.) In addition, China’s move to strengthen its intellectual property laws boosted expectations a partial trade deal can be worked out.
“I think both elections and trade are the key factors,” said Kenny Wen, wealth management strategist at Everbright Sun Hung Kai.
“The victory of pro democracy boosted up the market sentiment and people expect at least short term alleviation of the social unrest,” he said.
“Also, as Alibaba will be listed soon, subscription money will be unlocked,” he said.
Meanwhile, China’s step announced Sunday to strengthen intellectual property rights – a key issue in the ongoing US-China trade talks – gave a boost to the Hang Seng and other Asia markets, equities portfolio manager Ken Wong at Eastspring Investments said.
On the mainland, the sector rotation seen highlighted a recovery in buying interest in low-valuation old-economy stocks and the unravelling of crowded trading that included some of the year’s best performers.
“The recent trend of outperformance in old economy sectors, such as steel and property developers, and a correction in new economy sectors, such as tech, continued, partially supported by speculation about possible further economic stimulus,” said Gerry Alfonso, director of the international business department of Shenwan Hongyuan Group in Shanghai.
SGIS Songshan and Anyang Iron and Steel both surged by the 10 per cent daily cap and Huaxin Cement also jumped by that magnitude.
On the flip side, technology and liquor distillers continued to bear the brunt of the sell-off in what Sinolink Securities said was a typical year-end practise by institutional investors, who pare holdings of stocks with outsize gains to meet demand for possible redemption and performance reviews.
Shenzhen Goodix Technology, a maker of semiconductor components, slid 9.9 per cent to 185.28 yuan after surging 161 per cent this year through last week.
Kweichow Moutai, the world’s most valuable distiller, slipped 1 per cent to 1,182.06 yuan after falling 3 per cent on Friday.
Additional reporting by Lam Ka-sing
More from South China Morning Post:
- Hong Kong elections: pro-democracy camp wins 17 out of 18 districts while city leader says she will reflect on the result
- Amid protest closures, use of Hong Kong’s MTR network is down by a quarter