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Fosun Pharma’s biopharma unit Shanghai Henlius’ production base in Shanghai. Fosun International, is offering HK$24.60 per Henlius share to buy the stake it doesn’t already own which drove the price up 21.3 per cent to HK$22.85. Photo: SCMPOST
BusinessChina Business

Hong Kong stocks up, halt 3-day decline; Henlius soars by over a fifth on buyout plan

  • The Hang Seng Index trades at 8.9 times projected earnings for this year, the second cheapest among the world’s key markets, according to Bloomberg data
Hong Kong stock market
Zhang Shidong
Zhang Shidongin Shanghai
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Hong Kong stocks rose, snapping a three-day losing streak, as investors rummaged for bargains in a market that has seen the benchmark slide by nearly a tenth from this year’s peak struck last month, with renewed rate cut expectations in the US also boosting sentiment.

The Hang Seng Index climbed 0.3 per cent to 18,072.90 at the close, after a 2.2 per cent decline over the past three days. The Hang Seng Tech Index slid 0.6 per cent and the Shanghai Composite Index lost 0.4 per cent.

Beaten-down Chinese property developer stocks also gained, with Longfor Group Holdings rising 2.9 per cent to HK$11.46 and China Resources Land up 1.9 per cent to HK$27.20. Among other major gainers, Mengniu Dairy rallied 4.5 per cent to HK$13.94 and China Unicom advanced 2 per cent to HK$6.78.

“Hong Kong stocks are still attractive and have a high risk-reward ratio on the backdrop of improving expectations about fundamentals going forward,” said Kong Rong, an analyst at Tianfeng Securities. The 82-stock Hang Seng benchmark trades at an average of 8.9 times projected earnings for this year, the second cheapest among the world’s key markets, according to Bloomberg data.

The Communist Party’s third plenary session due next week will be in focus, with investors’ expectations building that long-term economic reform plans may be announced at the high-stakes political gathering.

Buying interest also came after traders ramped up the bets on an earlier cut in the interest rate by the Federal Reserve. The probability of a 25 basis-point reduction in Fed’s September policy meeting has now risen to 61 per cent from 45 per cent a month ago, according to the data by CME Group. The US is expected to reveal the May data on personal consumption expenditure, a gauge preferred by the Fed for its rate policy.

“For global investors seeking diversification from US equities, the Asia-Pacific equities could present a viable option and Hong Kong equity market stands out as a particularly attractive choice,” said index compiler Hang Seng Indexes Co said in a report on Tuesday.

Elsewhere, Shanghai Henlius Biotech was trading 19 per cent higher at HK$22.50, after rising as much as 21 per cent following a plan proposed by a unit of Fosun International to buy the stake it does not already own, at a price of HK$24.60 per share.

“By fully owning Shanghai Henlius, Fosun can tighten its grip on the entire value chain from R&D to commercialisation,” said Joyce Ng, a director at Fulbright Financial Group Holdings. “This vertical integration can drive operational efficiencies and allow the company to better capture the full economic benefits of its biotech investments.”

Other major Asian markets also rose driven by US rate cut hopes. Japan’s Nikkei 225 climbed 1 per cent, while South Korea’s Kospi gained 0.4 per cent and Australia’s S&P/ASX 200 added 1.4 per cent.

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