Hong Kong stocks recover to pre-national security law sell-off levels, market rises for third day in a row

Iris Ouyang

The Hong Kong market rose to an intraday high of 24,364.01, rising above 24,280 points, its close on May 21, in a recovery to pre-national security law sell-off levels on Wednesday.

Stocks in the city and mainland China followed in the footsteps of the S&P 500, which closed at its highest level since early March in the US overnight, while European stocks also rallied, as economic reopenings globally accelerated amid favourable signs from early economic data.

The Hang Seng Index closed 1.4 per cent higher at 24,325.62, its third consecutive gain this week. It erased all losses made since China’s legislature shocked the markets with its May 21 announcement of a plan to introduce a national security law for Hong Kong. The China Enterprises Index, which tracks the performance of H shares in Hong Kong, advanced 0.8 per cent to an 18-day high of 9,958.84. In mainland China, the Shanghai Composite Index closed 0.07 per cent higher at 2,923.37 for its fifth session of gains over the past five trading days.

“The market is filled with capital, and investors are looking for opportunities to invest” amid a global economic recovery, said Gordon Tsui, managing director at Hantec Pacific. “The emergence of IPOs and new technology stocks such as NetEase have helped to boost market sentiment.”

NetEase, a Chinese internet company, said on Monday that it was targeting as much as US$3 billion in a secondary listing in Hong Kong. Following news of a similar listing by JD.com, China’s second-largest online retailer, bourse operator Hong Kong Exchanges and Clearing itself rose on Wednesday to a record high for the year. It was up more than 2 per cent during trading and ended the day 1.8 per cent higher.

Auto stocks were among the big gainers in Hong Kong, with mainland China car sales expected to rise 3.2 per cent month on month and 11.7 per cent year on year in May, according to the China Association of Automobile Manufacturers. Geely Auto rose 2.9 per cent.

Wuling Motors Holdings surged by 20 per cent after the company said it would launch vehicles for street vendors that allow for easy display of goods.

Oil stocks also led the gains, after oil prices rose to their highest level in about three months. CNOOC shot up 4.8 per cent and Sinopec was up 3.8 per cent.

Meituan Dianping surged 5.1 per cent, after rising to a record high of HK$160.7, which pushed its market capitalisation to tenth among all Hong Kong stocks. Favourable sales during mainland China’s midyear shopping festival, commonly known as 618, buoyed e-commerce and technology stocks. Smartphone maker Xiaomi climbed 2.6 per cent on news that its various products ranked first on several e-commerce platforms in terms of sales. South China Morning Post parent Alibaba Group Holding gained 4.6 per cent.

The Hong Kong dollar has strengthened as well, trading at an intraday level of 7.7504, close to the upper limit of its peg with the US dollar. Beyond this point, the Hong Kong Monetary Authority (HKMA) is forced to intervene.

“There have not been significant fund outflows from either the HK dollar or the banking system,” Eddie Yue Wai-man, the HKMA’s chief executive, said in a statement overnight. “There is no shortage of US dollar banknotes in our banking system, and the demand will be fully met when banks step up their banknote distribution logistics. On the whole, the local financial market continues to operate in a smooth and orderly manner, reflecting strong market confidence in the Linked Exchange Rate System, a regime that is clear, transparent and proven to work well.”

Investors continued to set aside concerns about possible protests in Hong Kong against Beijing’s national security law. The social unrest in the United States could pose a risk to market sentiment, although investors were taking them as a side note to a global economic recovery.

“After all, if stock markets can survive the most profound economic calamity since the Great Depression, I am sure they can overcome the current level of civil unrest,” Stephen Innes, chief global markets strategist at AxiCorp, said in a note.

US-China spat boosts Hong Kong exchange owner’s value over LSE

The Shanghai Composite was boosted by stronger-than-expected Caixin China services PMI data, which shows that China’s economy was expanding. Retailers and retailing property companies recorded gains, with local governments extending support after Chinese Premier Li Keqiang stressed the importance of smaller retailers. Maoye Commercial surged by the daily cap of 10 per cent.

Investors’ concerns about US-China tensions were also alleviated to a certain extent by state-owned Global Times, which reported on Tuesday that Beijing was still buying American soybeans.

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