Hong Kong stock market starts the week strong as surging tech shares overcome China’s slowing recovery and fears about Reddit traders’ assault on hedge funds

Iris Ouyang
·4-min read

Hong Kong stocks started the week higher as surging technology shares overcame a slowdown in China’s economic recovery and wider market concerns about the havoc created by retail investors taking on hedge funds in the US.

The Hang Seng Index rose 2.2 per cent to 28,892.86 on Monday, after capping its first weekly loss of 2021 on Friday. The rally snapped four consecutive daily declines.

The Shanghai Composite Index, mainland China’s benchmark gauge, added 0.6 per cent to finish at 3,505.28.

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Tech companies, which had dipped in the previous few trading days, led the gains among blue chip stocks. Online food delivery giant Meituan was the runaway winner, rising 10 per cent to HK$391. Tencent Holdings jumped 4.5 per cent to HK$712.50, while Xiaomi rose 2.2 per cent to HK$29.85. The Hang Seng Tech Index, which has 31 constituents, surged 4.4 per cent.

Tech stocks have benefited from record high levels of capital raised by mainland Chinese funds looking for stocks for new investment portfolios. Mainland traders spent HK$12.5 billion (US$1.6 billion) buying Hong Kong stocks on Friday, a 28th straight day of net inflows, according to Bloomberg data. Net purchases totalled HK$310.6 billion in January. Net inflows into Hong Kong today reached HK$7.85 billion, data from Bloomberg show.

“Southbound funds continue to flow in, which is a big help for the market,” said Alvin Cheung, associate director at Prudential Brokerage in Hong Kong. “The market has lost around 2,000 points during the previous five trading days, and such low levels of stock prices are quite attractive for investors.”

The Hang Seng Index could reclaim the 30,000 level after Chinese New Year, Cheung predicted.

Some other stocks favoured by southbound capital also rallied on Monday. Oil giant CNOOC jumped by 3.2 per cent, while China Mobile added 2.9 per cent.

The rise in Hong Kong stocks came even as fresh data released this morning showed China’s economic recovery had slowed down. The Caixin manufacturing purchasing managers’ indexes (PMI) for January dipped to 51.5 from 53 in December. Although it was the ninth consecutive month of growth – a reading above 50 indicates expansion – it was the lowest level since July last year. The nation’s official manufacturing PMI and non-manufacturing PMI also fell more than expected in January from December, according to data released on Sunday.

Investors are closely watching developments in the battle between retail investors and professional hedge funds, which started in the US and quickly spread to other markets aided by rallying calls on the social media site Reddit. The retail investors, having snapped up shares like GameStop and AMC Entertainment Holdings, have now piled into silver and pushed the metal above US$29 an ounce.

It pushed up silver-mining related stocks in the mainland. Inner Mongolia Xingye and Shengda Resources surged by the daily cap of 10 per cent.

On the mainland, Hainan Airlines Holding plunged after the company said that it expected to post an annual loss of as much as US$10.06 billion. HNA entities also slumped after their parent company announced that a petition on January 29 in the provincial High Court was seeking its bankruptcy and for it to undergo restructuring.

New listings soared. Measurement gauge maker UNI-Trend Technology China and detection equipment producer CareRay Digital Medical Technology more than tripled in Shanghai to 71.60 yuan and 85 yuan respectively.

Luye Pharma jumped more than 52 per cent to HK$5.90 after saying it had agreed to sell 292.4 million shares – 9 per cent of the total number issued – to Hillhouse NEV. Hillhouse will own 15.6 per cent of the issued share capital after the deal.

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