Rebound in China, Hong Kong Stocks Accelerates on Policy Support
Rebound in China, Hong Kong Stocks Accelerates on Policy Support
(Bloomberg) -- The recovery in mainland China and Hong Kong stocks gathered pace Monday, helped by Beijing’s plan to reform its interest rate system and lower borrowing costs.
The Shanghai Composite Index jumped 2.1% and the ChiNext gauge closed up 3.5%, the biggest gains for both since July 1. The Hang Seng Index rose 2.2%, the most in two months. All three measures were higher for a fourth day. Cheap valuations in Hong Kong, where the benchmark is down 13% from an April peak, have also been luring investors from across the border.
“A policy boost to further develop Shenzhen as a technological hub, combined with expected lower borrowing rates as China makes some reform to its rate system, gave the equity market substantial support,” said Gerry Alfonso, director of the international business department at Shenwan Hongyuan Group Co.
China’s central bank will announce a new loan prime rate Tuesday morning and on the 20th of each following month, potentially stimulating demand for new credit and helping growth. State media also said the government will grant Shenzhen favorable policies as it looks to the city to play a key role in science and technology innovation. Related stocks rose.
“After some recent disappointing performances the tech sector is trading at relatively attractive valuations, further supporting today’s rally,” Alfonso said.
Bears targeted Hong Kong’s financial markets as weeks of protests, the U.S.-China trade dispute and a weaker yuan hurt the prospects for the city’s assets. Selling momentum in stocks was the strongest in almost four years last week, while currency traders loaded up on bets against the local dollar.
“Investors are more willing to do some short covering and bargain hunting after earlier worries eased -- the protests were relatively peaceful and some positive expectations on China-U.S. trade talks are emerging again,” KGI Asia Ltd. executive director Ben Kwong said, referring to a large demonstration in the city on Sunday. He also said the market is oversold.
President Donald Trump said the U.S. is talking with China, hours after his top economic adviser laid out a potential timeline for the resumption of trade discussions with Beijing.
The Hang Seng gauge was one of the worst major indexes worldwide in the past month, trading at its lowest level relative to a gauge of global shares since 2006. It rose above the key 26,000-point level Monday. The Hong Kong dollar edged down 0.01% to 7.8437 per U.S. dollar and the yuan was little changed.
To contact Bloomberg News staff for this story: Amanda Wang in Shanghai at twang234@bloomberg.net
To contact the editors responsible for this story: Sofia Horta e Costa at shortaecosta@bloomberg.net, Will Davies, Philip Glamann
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With assistance from Bloomberg
