HONG KONG, July 2 — Hong Kong stocks rallied almost three per cent today, led by property firms as investors bet a new Chinese security law will return stability to the city and prevent the sometimes-violent protests that hammered its economy last year.
The Hang Seng Index returned from a one-day break to close 2.85 per cent, or 697.00 points, higher at 25,124.19, in line with a rally across Asian markets, as hopes for a coronavirus vaccine and the reopening of economies offset worrying spikes in the United States.
The benchmark Shanghai Composite Index added 2.13 per cent, or 64.59 points, to 3,090.57, while the Shenzhen Composite Index on China’s second exchange jumped 1.25 per cent, or 24.94 points, to 2,016.05.
The new law, introduced late Tuesday, has fuelled worries about the city’s autonomy and warnings that it marks its end as a major financial hub.
There were clashes yesterday and hundreds of arrests but the concerns appeared to be put aside as the market reopened, with property firms rallying.
New World Development climbed 7.61 per cent, China Overseas Land and Investment rose 6.82 per cent, Country Garden rallied 5.04 per cent and Henderson Land jumped 4.08 per cent.
The Hong Kong dollar was also holding its strong position against the greenback, which analysts said suggested there was no immediate threat of capital flows out of the city.
“Though there were protests yesterday, the number of people that took to the streets was much fewer, and severity of the clashes was far less than some of the violence we saw last year,” Raymond Cheng, at CGS-CIMB Securities, said. “That’s reassuring for business.”
New listings
The HSI took a battering last year as Hong Kong was brought to a standstill by months of protests that shut off thoroughfares in the centre of the city, forced the closure of the airport at one point, and crippled the crucial tourist industry.
Bloomberg News said observers had noticed vast sums of cash moving south from mainland investors, which was providing support to the Hang Seng.
It cited one trader who wished to stay anonymous as saying he had handled a number of orders on behalf of a state-backed fund.
Bloomberg reported that mainland-based buyers had bought about US$258 million (RM1.1 billion) of stocks in the first hour of trading.
Chinese state-backed funds often step into mainland markets to support prices, particularly around key anniversaries or events.
Hong Kong’s exchange has seen the listing of several major mainland firms of late, with e-commerce giant JD.com and tech firm NetEase raising almost US$7 billion in IPOs last month.
They followed the more-than-US$4 billion listing of Beijing-Shanghai High Speed Railway and Alibaba’s massive US$12.9 billion IPO last year.
However, the market is underperforming compared with most others around the world, rising a little more than three per cent in the second quarter, compared with 20 per cent for the S&P 500 in New York and 18 per cent for Tokyo’s Nikkei 225.
And, with the US pushing ahead with sanctions on Chinese officials linked to the law, and other countries condemning the move, analysts said there could be rocky times ahead.
“The response of the international community, and China’s response back, do represent a potentially serious headline risk into the later part of this week,” said OANDA’s Jeffrey Halley. — AFP
