Hong Kong, mainland stocks extend rally as CICC predicts China to ease fiscal tightening soon

·3-min read

Hong Kong stocks advanced on optimism that foreign investors will flock to local markets, following signs that the Chinese government would loosen the nation’s fiscal tightening.

The Hang Seng Index rose for a second day, adding 0.9 per cent to approach a one-month high of 29,166.01. The Shanghai Composite gained 0.3 per cent to 3,593.36, after reaching a three-month high on Tuesday.

Chinese hotpot chain Haidilao led gainers among blue chip stocks, rising 4.8 per cent to HK$48 after Morgan Stanley analysts upgraded the stock to “overweight” with a price target of HK$55, according to Bloomberg data.

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The extent of fiscal tightening may ease in China over the next two months, after slower sequential growth in the first quarter, analysts at China’s biggest investment bank CICC, said in a report on Tuesday. The view was based on fiscal surplus in the first four months, and potentially smaller deficit than budgeted for the rest of 2021.

Guotai Junan Securities said in a May 23 report that the Shanghai Composite Index could break out of sideways trading and rise to the 4,000 points, a level not seen since 2015, as concerns about inflation and policy tightening risks eased.

Hong Kong Exchanges and Clearing rose 1.7 per cent to HK$482.80 to reach the highest in nearly a month after chief executive Nicolas Aguzin pledged the bourse operator would keep a steady course connecting China with global markets.

Shares of cruise operator Genting Hong Kong soared 20.9 per cent to HK$0.52, its largest daily gain since February 17. The government said cruise departures would resume in late July at the earliest, permitting residents to holiday at sea without having to undergo quarantine.

Shanghai Fosun Pharmaceutical, BioNTech’s exclusive partner for its vaccines in mainland China, Hong Kong, Macau and Taiwan, soared 7.8 per cent to a record high of HK$64.70. The Nantou county in Taiwan planned to buy 300,000 doses through Fosun Pharma.

Alibaba Health retraced 5.7 per cent to HK$20.60, reaching its lowest level since December 28. Its earnings turnaround in the year to March 31 trailed analysts estimates compiled by S&P Capital IQ.

E-cigarette maker Smoore International plunged 17.1 per cent to HK$51.15, its biggest decline in two months, after the World Health Organization and the National Health Commission released a health report highlighting the health risks of electronic smoking.

Stocks in mainland China climbed as brokerages rallied amid record foreign purchases. China Industrial Securities soared by the maximum 10 per cent while Tianfeng Securities rose 4.9 per cent. Liquor distiller Kweichow Moutai rose 1.2 per cent to 2220 yuan.

Two companies debuted on mainland bourses. Guangdong Kitech New Material Holding, which manufactures modified polypropylene products, gained 223 per cent while logistics service provider Bondex Supply Chain Management appreciated 44 per cent.

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