Hong Kong stocks made tentative gains in early trade on Tuesday as investors bet on increased policy support from Beijing amid China’s sluggish economic data and trade frictions with the European Union.
The Hang Seng Index rose 0.1 per cent to 17,954.99 at 11:30am local time. The Hang Seng Tech Index added 0.3 per cent while the Shanghai Composite Index advanced 0.4 per cent.
Despite the weak credit and property investment numbers, the People’s Bank of China (PBOC) kept the one-year medium-term lending facility rate unchanged on Monday, triggering calls for Beijing to inject more support for the economy.
“PBOC will absolutely have to ramp up policy support in the second half of 2024,” said Carlos Casanova, economist at UBP. “The support may or may not be in the form of rate cuts. They can still use RRR [reserve ratio requirement] cuts and there’s a real need to expand the home purchasing programme.”
Dickie Wong, executive director at Kingston Securities, also pointed to uninspiring data that may push the Chinese government to “implement another interest rate cut at their meeting in July to help stimulate the market”.
In a market positive news to help with market liquidity, Hong Kong will see trading continue as normal during typhoons and torrential rains from September 23, scrapping the more than 70-year-old practice of halting the market during bad weather, according to the city’s government on Tuesday.
Warren Buffett’s Berkshire Hathaway cut its stake in Chinese EV maker BYD ahead of the tariffs, reducing its holding to 6.9 per cent from 7 per cent. BYD edged down 0.2 per cent to HK$233.
Shares of Zijin Mining Group topped the turnover list, falling 2.6 per cent to HK$15.90 after its proposed sale of a combination of convertible bonds and shares to raise US$2.5 billion, according to the company’s filing on Tuesday. The stock decline is in anticipation of selling by convertible arbitrage hedge funds who seek profits based on the pricing discrepancy between a company’s convertible bonds and its underlying stock.
Zijin’s convertible bonds offering followed a series of similar issuances from Chinese technology companies to take advantage of the cheaper borrowing costs of such instruments compared with traditional bond sales when interest rates are elevated.
“More convertible issuance should come from Chinese firms,” said S&P Global Ratings credit analyst Clifford Kurz in a note on Monday. “While we view the instruments as fully debt and thus as immediately credit negative, longer term they could be credit positive, if conversion kicks in.”
Wuhan Youji Holdings, which makes toluene derivative products, jumped 77.5 per cent from its initial public offering price (HK$5.50) to HK$9.76 on its trading debut in the city.
Other major Asian markets were broadly higher. Japan’s Nikkei 225 rose 1.1 per cent and South Korea’s Kospi added 1.0 per cent, while Australia’s S&P/ASX 200 advanced 1.0 per cent.