Major mainland Chinese stock indices have now recouped losses suffered since January 23, when a citywide quarantine in Wuhan, capital of the central Hubei province, effectively kicked off a three-month lockdown in many parts of the country.
The markets rose after US stocks gained overnight on hopes an effective coronavirus vaccine made by a recognised company could be available soon. The Shanghai Composite Index and the Shanghai A Share Index both closed on Thursday above their pre-Covid-19 levels, while two benchmarks in Shenzhen soared to their highest closes since then. The first major economy to enter a lockdown, China is also the first to slowly recover from it.
The Shanghai Composite advanced 2.1 per cent to 3,090.57, its highest level in five-and-a-half months, and the Shenzhen Composite Index added 1.3 per cent to 12,269.49, its biggest gain in four-and-a-half years. Transaction volumes in Shanghai and Shenzhen crossed one trillion yuan (US$141.5 billion) for the first time in four months, according to Wind Information.
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“The economic recovery is going well, while policies remain stable,” said Shen Zhengyang, an equity strategist at Northeast Securities in Shanghai, adding that the market was increasingly active as funds were looking to invest the money they had raised. “This capital is looking for stocks that have been lacking gains, such as those in the financial, property and construction materials sectors.”
In Hong Kong, the Hang Seng Index closed at its highest level in three-and-a-half months on the first trading day of the third quarter. After observing a one-day holiday on July 1 marking the formation of the Hong Kong Special Administrative Region, the index rose 2.9 per cent to 25,124.19, its highest level since March 11.
Index heavyweight Tencent Holdings soared 4 per cent to HK$518.5, the first time that the technology giant’s stock has crossed HK$500 at the close. Thursday was the third time it has broken through the HK$500 mark in intraday trading, and has surged 38 per cent this year.
Meituan Dianping rose by as much as 5 per cent to HK$180 during the day, a record high for the food delivery platform, and closed 4.4 per cent higher.
Property companies led the gains in Hong Kong, as investors flocked to the market to buy stocks at cheap levels amid a rebound in real estate sales and housing prices in mainland China. China Resources Land surged 7.8 per cent and New World Development rose 7.6 per cent.
Late last month, credit rating agency S&P Global said it would maintain its “AA+/A-1+” rating for Hong Kong, three notches above China. Moody’s and Fitch have also rated Hong Kong higher than China, underscoring the city’s unique market position and debunking the myth that it would become “just another Chinese city” with the passing of the national security law.
The rating underlined the expectation that “institutional changes as a result of the impending national security legislation will not affect Hong Kong’s autonomy in setting economic policies as laid out in Hong Kong’s Basic Law,” S&P Global said in a statement. “We also do not expect any changes to trade relations between the US and Hong Kong to seriously jeopardise the territory’s financial sector development and economic growth.”
The gains on the mainland were led by financial and liquor stocks on Thursday. China Life Insurance surged 6.8 per cent and Ping An Insurance gained 3.4 per cent. Bank stocks also gained after Beijing said it will allow local governments to recapitalise some small banks with funds that they raised by issuing special bonds, the State Council said on Wednesday. The announcement pushed up shares of banks on Thursday. Qingdao Rural Commercial Bank soared by the daily cap of 10 per cent, while Bank of Xi’an surged 7.7 per cent.
The gains came as drug maker Pfizer and German biotechnology company BioNTech said they had developed a Covid-19 vaccine whose first trial showed it was safe.
“Covid-19 vaccine data from BioNTech and Pfizer is the best from any player so far, even though it is only the first phase trial,” said Stephen Innes, chief global markets strategist at AxiCorp. “I suspect the markets would have preferred it to come from a more recognised vaccine player, and then it would be a considerable sentiment boost. Even more so, if the patient numbers were more abundant.”
Hong Kong Clearing and Exchanges (HKEX) said in a tweet after the market closed on Thursday that it set a single-day record for northbound capital flows of 149.2 billion yuan (US$21.1 billion) via Stock Connect with the Shanghai and Shenzhen stock exchanges. The previous single-day record was 124.3 billion yuan on November 26.
— HKEX 香港交易所 (@HKEXGroup) July 2, 2020
The markets were boosted by better economic data from the United States and mainland China, the world’s two largest economies.
Upbeat data from the US, where a jump in both the index of national factory activity by the Institute for Supply Management and an increase in private payrolls, showed economic recovery in the world’s largest economy.
The US data, meanwhile, followed better-than-expected official and Caixin/Markit PMI data from China this week, which showed faster recovery in factory output in the world’s second-largest economy.
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