Hong Kong stocks cap best winning streak in 3 months amid regional recovery

Hong Kong stocks extended gains for the fifth consecutive day as markets across the region recovered from last week's rout, while Tencent rallied on earnings-surprise bets.

The Hang Seng Index added 0.4 per cent to 17,174.06 on Tuesday, the fifth straight day of gains and the best winning streak in three months. The Tech Index was little changed, while the Shanghai Composite Index jumped 0.3 per cent.

Tencent jumped 1.3 per cent to HK$380, the highest level in a month, as its earnings card due Wednesday is likely to show profit surged 54 per cent last quarter. Pork producer WH Group rallied 5.1 per cent to HK$5.53 before earnings release today, while Sands China jumped 2.7 per cent to HK$13.92 to recoup losses on Monday. CNOOC rose 1.6 per cent to HK$20.05 after oil prices spiked amid rising fears of expanded Middle East conflicts.

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Limiting gains, Li Auto dropped 1.6 per cent to HK$75.80, leading a retreat among electric vehicle makers. Food delivery platform Meituan slipped 0.8 per cent to HK$103.20 and gaming firm NetEase declined 1.9 per cent to HK$138.10.

The five-day winning streak for the city's benchmark index - the best since the May rally - follows a plunge to a three-month low amid last week's regional sell-off. The index has now recouped all losses seen then. Sentiment stabilised as investors shifted focus to US inflation data to gauge the Fed's rate path.

Still, it remains to be seen whether the rebound will hold up, as the fundamentals have not yet turned the corner and global funds flowing into the city are doing so mainly due to the need to rebalance because of low valuations, analysts said.

"Once the Hong Kong stock market sees some substantial gains, the volatility rises, which could lead to more profit-taking" like the bull run from April to May, analysts at Ping An Securities said in a note on Monday. The key to sustained inflow lies in the further recovery of mainland China's economic momentum, they added.

Contracting trading volume in the city's market is also a potential concern, indicating a possible lack of sustained investor interest in the current market conditions. Turnover on the city's stock exchange slid to HK$66.8 billion (US$8.6 billion) on Tuesday, a six-month low.

Mainland funds remain cautious on China's growth outlook amid Beijing's reluctant policy easing, along with increased concerns about US recession risk, election uncertainty, and the potential impact on China's macro economy and markets, Goldman Sachs said in a note on Tuesday, citing recent meetings with local clients.

"We believe markets may become less responsive to policy easing announcements than before" after previous measures "proved to be less effective than market expectations", they added.

Elsewhere, County Garden Services tumbled 5.1 per cent to HK$4.40 after it said net profit for first half of the year slid as much as 37 per cent to 1.7 billion yuan (US$237 million) in first six months of this year amid China's ongoing property downturn.

Major Asian markets advanced, continuing a recovery from the sell-off last week. Japan's Nikkei 225 rallied 3.4 per cent, Australia's S&P/ASX 200 Index climbed 0.2 per cent, while South Korea's Kospi Index added 0.1 per cent.

This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2024 South China Morning Post Publishers Ltd. All rights reserved.

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