Hong Kong stocks snap back-to-back losses as UBS sees return of confidence in economy

Martin Choi
·3-min read

Hong Kong stocks rebounded from their worst back-to-back losses in six weeks as the city’s economy grew last quarter by more than economists predicted, buoying risk appetite.

The Hang Seng Index rose 0.7 per cent to 28,557.14. The index had slipped more than 3.2 per cent over the previous two sessions, the worst streak since March 24. Markets in mainland China remain shut until Wednesday for Labour Day.

Sinopec led gainers among blue chips, rising 4.1 per cent to HK$4.08, while PetroChina added 3.5 per cent to HK$2.92 as oil rallied for two days to above US$65 a barrel. Chinese apparel producer Anta Sports rose 3.1 per cent to HK$142.70, while smartphone maker Xiaomi added 1.4 per cent to HK$24.80.

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The city’s economy expanded 7.8 per cent from a year ago when it sank 9.1 per cent at the outset of Covid-19 pandemic, according to an advance estimate published by the statistics department late Monday. It was the fastest in 11 years, and exceeded consensus for a 3.7 per cent gain in a Bloomberg survey.

“We believe the growth recovery provides room for the government to focus more on other tasks,” William Deng, North Asia economist at UBS said in a note to clients on Tuesday. “In the near term, the most important task is to effectively combat Covid-19 and reduce the risk of another local wave.”

The economic performance reflects Hong Kong’s capacity to rebound from shocks and is likely to enhance confidence in its economy, the Swiss investment bank said. UBS likes market laggards, with relatively low valuations and fundamentals driven by potential border reopening and demand recovery, strategist Angus Chan added.

Analysts at Nomura also expect Hong Kong’s growth to remain solid in coming months, on the back of a largely stable local Covid-19 situation, a push for speedier vaccination rate and further easing of social distancing rules, they said in a report.

Hong Kong’s borders have been largely closed since February last year, reducing tourist arrivals to a trickle. The government has been planning travel-bubble programmes with other countries to help revive part of the economy, including one with Singapore starting on May 26.

Ping An Insurance fell again, losing 0.8 per cent to HK$82.20 on top of a 2.5 per cent slump on Monday. China’s biggest insurer is leading a consortium of state-owned entities to restructure the assets of bankrupt Peking University Founder Group, involving an US$11.3 billion cash infusion.

In other Asia-Pacific markets, South Korea’s Kospi erased losses to rise 0.6 per cent while Australia’s S&P/ASX 200 added 0.6 per cent.

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