Hang Seng Index soars 6.2% as BlackRock’s ‘overweight’ call fuels China stock frenzy

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Stocks jumped for a sixth straight day as gains snowballed to US$3 trillion since Beijing unveiled its biggest stimulus package in this cycle

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Pedestrians walk past a stock ticker outside the Exchange Square in Central. Photo: EPA-EFE

Jiaxing Li

Published: 10:34am, 2 Oct 2024Updated: 3:56pm, 3 Oct 2024

Hong Kong stocks soared for a sixth day in a row, hitting a 20-month high on mounting speculation China is not done with its stimulus to rescue the market. BlackRock said investors may expect more measures from Beijing to jump-start the ailing economy.

The Hang Seng Index jumped 6.2 per cent on Wednesday to the highest level since January 2023, bringing the six-day cumulative gain to 23 per cent. The Tech Index surged 8.5 per cent. A gauge tracking US-listed Chinese stocks rallied 5.5 per cent in New York on Tuesday. Markets in mainland China are closed this week for a holiday.

The Hang Seng Index’s 1,310-point rally today is the biggest single-day jump since March 2022. Trading volume totalled HK$434 billion, despite the closure of the Stock Connect scheme that links the exchange with markets in Shanghai and Shenzhen.

More than US$770 billion in market value has been restored to Hong Kong stocks in the six-day rally, snowballing the tally to US$3 trillion across Chinese stocks since Beijing unveiled its biggest stimulus bazooka to stop the rot in the property and stock markets. China reclaimed the biggest share of weight in the MSCI Emerging Markets Index at 27.8 per cent, Bloomberg estimated, versus 24.4 per cent in August.

“We see room to turn modestly overweight [on] Chinese stocks in the near term” given their near-record discount to developed-market shares even with the recent surge, BlackRock strategists said in note on Tuesday. More fiscal stimulus may be coming, and that will prompt more investors to buy, they added.

Wall Street banks including Morgan Stanley are now scrambling to raise their targets on key China equity indices after the rally burned short-sellers by nearly US$7 billion. A significant amount of short-covering could fuel further gains in Chinese stocks, according to US market analytics firm S3 Partners.