Hong Kong stocks near 8-month highs on economic optimism after solid trade data and as more Chinese cities lift home buying restrictions

Hangzhou is the first major city in China to scrap curbs on home purchases, and follows similar relaxations announced by the southwest city of Chengdu last month
The Hang Seng Index has gained more than 4 per cent this month, extending a 7.4 per cent advance in April prompting Morgan Stanley to advise investor caution

Hong Kong stock market

Zhang Shidongin Shanghai

Published: 10:57am, 9 May 2024

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Hong Kong stocks rose close to their eight-month highs on Thursday on optimism that stability will return to China’s economy after more policy-loosening steps, targeting the floundering property market, were unveiled and after China’s exports and imports both exceeded estimates in April.

The Hang Seng Index climbed 1.2 per cent to 18,537.81 at close, after a two-day, 1.4 per cent drop. The Hang Seng Tech Index gained 2 per cent and the Shanghai Composite Index added 0.8 per cent.

Longfor Group Holdings jumped 3.7 per cent to HK$11.92 and its peer China Resources Land added 2.7 per cent to HK$29.95 after the city of Hangzhou removed all the restrictions on home purchases.

Semiconductor Manufacturing International Corp rallied 4.7 per cent to HK$16.02 ahead of the release of its first-quarter results.

“There are growing expectations about policy support and that has apparently lifted market sentiment,” said An Qingliang, an analyst at Guorong Securities. “More follow-up measures will be implemented at a faster pace going forward, to resolve the crisis in the property market and defuse the risks. These steps will help reinforced expectations about a pickup in the economy.”

A customer is looking at a model of a property at a real estate sales centre in Hangzhou, Zhejiang Province, China, on January 17, 2024. Photo: Getty Images

Hangzhou, where e-commerce giant Alibaba Group Holding is based, is the first major city in China to scrap curbs on home purchase after a Politburo meeting by the end of April pledged to tackle the woes on the housing market. The west city of Xian followed Hangzhou on Thursday in removing all home purchase restrictions. Hangzhou and Xian joined Chengdu, the capital city of southwest Sichuan province that said last month that it would no longer review qualifications on homebuyers.

Everbright Securities said nearly 60 cities had cancelled the mortgage rates floor up to end-April.

“We expect the trend to extend before new home sales and prices begin to recover, which must be supported by faster property policy easing at upper-tier cities,” the brokerage said in a report.

The brokerage did not expect a full and quick recovery, but a modest and gradual one nationally “due to extreme bifurcation between large tier cities in coastal areas recovering much more quickly than lower tier inland cities beset by high inventories”.

Shenzhen, Wuhan latest Chinese cities to ease housing market restrictions

Optimism was sustained this morning after trade data showed China’s export growth surpassed market expectations in April.

“Exports have been the bright spot in China’s economy so far this year,” said Zhiwei Zhang, chief economist at Pinpoint Asset Management. “The weak domestic demand led to deflationary pressure, which boosts China’s export competitiveness. This is actually good news for the global economy given the inflation pressure many central banks are fighting against.

The policies in the property sector are changing in a meaningful way recently. A stabilisation of the property sector would help to boost domestic demand and mitigate the deflationary pressure.”

Sentiment on Hong Kong stocks has reversed dramatically over the past month with global investors seeking to deploy funds as they rotated out of US and Japanese equites following sharp rallies in those markets. The Hang Seng Index has gained more than 4 per cent this month, extending a 7.4 per cent advance in April that made it the best-performing benchmark globally. The rapid run-up has prompted Morgan Stanley to issue a call that cautions about buying into Chinese stocks at the index level.

Elsewhere, Ganfeng Lithium Group, a producer of the metal, jumped 7.6 per cent to HK$26.85 and rival Tianqi Lithium rallied 4.2 per cent to HK$32.65 after the ministry of industry and information technology issued industry guidelines to limit new projects and capacity.

Omat Advanced Materials, which makes materials for semiconductor displays and touch screens, surged 169 per cent to 25.87 yuan on the first day of trading in Shanghai.

Other major Asian markets fell across the board. Japan’s Nikkei 225 fell 0.3 per cent, while South Korea’s Kospi retreated 1.2 per cent and Australia’s S&P/ASX 200 lost 1.1 per cent.

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