Hong Kong stocks rally as buyers pile into Alibaba, JD.com after US$97 billion tech rout while China pledges to temper wild swings

·3-min read

Hong Kong stocks rallied, overturning losses in the first week of the year, as traders continued to load up Chinese tech companies on valuation appeal. Chinese market regulator also pledged to prevent wild swings in prices.

The Hang Seng Index added 1.8 per cent to 23,493.38 at the close, extending a late surge on Thursday that lifted the benchmark from near a 21-month low. The index logged a 0.4 per cent gain for the week. The Hang Seng Tech Index advanced 2 per cent, and China’s Shanghai Composite Index fell 0.2 per cent.

Alibaba Group Holding, which owns this newspaper, surged 6.5 per cent while JD.com jumped 4.8 per cent and Tencent Holdings added 1.4 per cent. Kuaishou Technology, Bilibili and Baidu all gained by more than 3 per cent.

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“In the long run, technology growth is inevitable to realise ‘common prosperity’ and strengthen competition amid US-China tensions,” said Zhang Qiyao, an analyst at Industrial Securities. “The pullback in tech stocks was mainly due to the disruption from positions, sentiment and investment styles.”

Buyers returned after a sell-off that erased more than US$97 billion of market value in technology stocks this week before the belated recovery. Values emerged as the 64 members of the Hang Seng Index trade at a 3 per cent discount to their net asset value, according to Bloomberg data. Their price-to-book value has also slipped below 1 time for 20 straight days.

Meanwhile, the China Securities Regulatory Commission pledged to stabilise markets and prevent wild price swings after a rocky start in onshore and offshore Chinese stocks in the new year, state-run broadcaster CCTV said, citing its chairman Yu Huiman.

Stock rout not just about tech crackdown as earnings model shows 70 per cent odds of sharp contraction

Montreal-based BCA Research warned that there was a 70 per cent chance about a significant contraction in earnings for Chinese companies amid the economic slowdown, posing a threat to risk assets.

Chinese property developers rallied on speculation their mergers and acquisitions will be exempted from Beijing’s stringent “three red lines” policy, which caps leverage and debt-funded expansion. China Overseas Land and Investment surged 9.1 per cent and China Resources Land rallied 7.3 per cent.

Shimao Group bucked the trend, tumbling 5.4 per cent after one of its units that stood as a guarantor failed to make good a 645 million yuan (US$101 million) trust loan due December 25.

Software developer Beijing Sunway World Science & Technology jumped 98 per cent from the initial public offering price to 60.10 yuan on the first day of trading in Shenzhen. Jiangsu Yahong Meditech slumped 23 per cent on its Shanghai debut.

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