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Bloomberg
The recovery in mainland China and Hong Kong stocks gathered pace on Monday, helped by Beijing’s plan to reform its interest rate system and lower borrowing costs.
The Shanghai Composite Index jumped 2.1 percent and the ChiNext gauge closed up 3.5 percent, the biggest gains for both since July. The Hang Seng Index rose 2.2 percent, the most in two months. All three measures were higher for a fourth day. Cheap valuations in Hong Kong, where the benchmark is down 13 percent from an April peak, have also been luring investors from across the border.
“A policy boost to further develop Shenzhen as a technological hub, combined with expected lower borrowing rates as China makes some reform to its rate system, gave the equity market substantial support,†said Gerry Alfonso, director of the international business department at Shenwan Hongyuan Group Co.
China’s central bank will announce a new loan prime rate on Tuesday and on the 20th
of each following month, potentially stimulating demand for new credit and helping growth. State media also said the government will grant Shenzhen favorable policies as it looks to the city to play a key role in science and technology innovation.
“After some recent disappointing performances the tech sector is trading at relatively attractive valuations, further supporting today’s rally,†Alfonso said.
Bears targeted Hong Kong’s financial markets as weeks of protests, the US-China trade dispute and a weaker yuan hurt the prospects for the city’s assets. Selling momentum in stocks was the strongest in almost four years, while currency traders loaded up on bets against the local dollar.
“Investors are more willing to do some short covering and bargain hunting after earlier worries eased — the protests were relatively peaceful and some positive expectations on China-US trade talks are emerging again,†KGI Asia executive director Ben Kwong said, referring to a large demonstration in the city. He also said the market is oversold.
President Donald Trump said the US is talking with China, hours after his top
economic adviser laid out a potential timeline for the resumption of trade discussions with Beijing.
The Hang Seng gauge was one of the worst major indexes worldwide in the past month, trading at its lowest level relative to a gauge of global shares since 2006. It rose above the key 26,000-point level.