Hong Kong stocks erase losses on report China to ease financing curbs on developers despite inflation risks

·3-min read

Hong Kong stocks advanced as Country Garden led gains among developers on speculation Beijing will ease funding restrictions to help stem debt defaults. The rally overturned earlier losses following a report showing inflation accelerated in China last month.

The Hang Seng Index climbed 0.7 per cent to 24,996.14 at the close on Wednesday, after losing as much as 1.3 per cent. The Hang Seng Tech Index jumped 2.1 per cent while China’s Shanghai Composite Index slipped 0.4 per cent.

Chinese developers accounted for the four biggest index gainers after the state-run Securities Times said policymakers will loosen curbs on real-estate companies to sell bonds in the interbank market. That would be a relief to indebted developers reeling from a liquidity squeeze since China introduced the “three red lines” rules to stem excessive leverage in the industry.

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“We expect the mortgage rates to peak gradually and the property market to get back on their feet in the post-pandemic era,” said He Miannan, an analyst at Everbright Securities. “Big industry players have stable earnings growth and high dividend yields and they are very attractive to big funds.”

Stocks had earlier slumped after China said producer prices surged 13.5 per cent in October from a year earlier, the fastest pace in 26 years. Consumer inflation quickened to 1.5 per cent, a level not seen since September 2020, it added on Wednesday.

The trend undermined bets among some investors for policy easing, such as a cut in borrowing costs, to help revive faltering growth. China’s economy has slowed over the past two quarters as a resurgence in Covid-19 cases led to stricter lockdowns and a power outage crippled production.

Half of the stocks on the 60-member Hang Seng Index gained, with a gauge tracking developer surging 3.1 per cent. Country Garden rallied 7.9 per cent to HK$7.24 while China Resources Land jumped 8.8 per cent to HK$31.55. Longfor Group climbed 6.9 per cent to HK$36.55.

Tencent Holdings advanced 4.2 per cent to HK$483.60, before the WeChat operator reports its third-quarter earnings on Wednesday. The second-largest Hang Seng member said earnings rose 3 per cent from a year earlier, beating estimates for a flat trend. Growth slowed from 29 per cent in the second quarter and 65 per cent in the first.

Chinese makers of electric vehicles weakened, tracking an overnight slump in Tesla. CEO Elon Musk’s Twitter followers asked the billionaire to sell a 10 per cent stake, while his brother offloaded some of his stake in the US electric-car maker. BYD slid 3.6 per cent to HK$299.40. Li Auto and XPeng lost at least 5.2 per cent.

Beijing Capital Jiaye Property Services flopped on its first day of trading in Hong Kong, losing 0.2 per cent from the initial public offering price to HK$8.26.

Three stocks made their debuts on the mainland exchanges. Shandong Longhua New Material surged 146 per cent in Shenzhen. Jee Technology soared 95 per cent while Shenzhen Qianrui Precision Technology advanced 88 per cent.

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