Hong Kong stocks gained, pacing a rally in Asia-Pacific markets, as traders snapped up oil producers and property developers in a shift to the old-economy stocks on outlook for a faster economic recovery.
The Hang Seng Index jumped 1 per cent to 30,623.64 at the close on Tuesday, reversing an intraday loss of as much as 0.6 per cent. The Shanghai Composite Index dropped 0.2 per cent.
Both benchmarks tumbled on Monday as popular bets that thrived on sloshing liquidity for most part of 2020 – from Tencent Holdings and Meituan in Hong Kong to liquor distiller Kweichow Moutai in Shanghai and a slew of technology stocks in Shenzhen – bore the brunt of market sell-off.
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CNOOC and New World Development rose by at least 3.4 per cent, leading so-called old-economy stocks higher as prices from crude oil to copper and aluminium extended their recent advances on growth reflation plays.
Galaxy Entertainment surged 8.9 per cent to HK$76.05 and Sands China climbed 7.5 per cent to HK$38.55. Casino operators benefited after Macau scrapped quarantine requirements on all mainland tourists travelling to the world’s biggest gambling hub.
HSBC surged by as much as 6.5 per cent after the release of its annual result on Tuesday, The UK-based lender, one of three note-issuing banks in Hong Kong, surprised the market by proposing a bigger than expected dividend following its latest earnings report.
Investors are betting on companies whose sales and earnings growth are tacked to the strength of economic rebound, a pattern fuelled by rising yields on the longer-dated Treasuries. Progress on global Covid-19 vaccination has also started to flatten infection curve, while hopes for a US$1.9 trillion stimulus package in the US are bolstering commodity prices and old-economy stocks.
Rising bond yields and an upsurge in commodities have heightened the risks of global central banks dialling back their expansionary monetary policies to contain inflation, prompting a sell-down in richly-valued technology firms in favour of cyclical stocks. China’s economy may expand 8.1 per cent in 2021 versus 2.3 per cent last year, according to the IMF projection.
“The nascent sparks of inflation we’ve seen recently and the corresponding sell-off in [bonds] really reflects increasing positivity around the economic outlook,” said Kerry Craig, a strategist at JPMorgan Asset Management. “A steepening yield curve usually helps to bolster value-oriented and cyclical sectors of the equity market.”
Gains Hong Kong outstripped those around the region. The S&P/ASX200 Index in Australia advanced 0.9 per cent and Taiwan’s Taiex added 0.2 per cent, while South Korea’s Kospi index slipped 0.3 per cent. Japan’s market was closed for a holiday.
Hong Kong will unveil its annual budget plan on Wednesday, in which Financial Secretary Paul Chan Mo-po is expected to announce one-off loans of HK$10 billion (US$1.28 billion) to aid the unemployed after the city’s jobless rate surged to a 16-year high of 7 per cent in January.
HSBC added 0.4 per cent to HK$46.70 as the close, after hitting as high as HK$49.50. The bank has proposed a US$0.15 dividend per share, resuming the payout that was halted in April to preserve cash during the Covid-19 crisis. Its fourth-quarter profit of US$2.2 billion also beat the estimate of US$1.8 billion in a Bloomberg survey.
Technology stocks were the laggards, with Xiaomi Corp and Meituan sliding at least 1.9 per cent. They contributed to a 1.1 per cent drop in the Hang Seng Tech Index. The barometer slumped 5.5 per cent on Monday in the biggest pullback since November 11.
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