Alibaba, China Life, NetEase pace Hong Kong stocks as investors hope for China policy support after weak economic data

The ‘silver lining’ in China’s weak economic data could be further policy support, including a cut to the reserve-requirement ratio, Invesco strategist says

‘Recovery will strengthen gradually, driven by consumption, and in turn by gains in labour income,’ Morgan Stanley said in a research note on Thursday

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A pedestrian passes by the Hong Kong Stock Exchange electronic screen in Hong Kong on April 26, 2023. Photo: AP

Published: 10:41am, 18 May 2023Updated: 4:32pm, 18 May 2023

Hong Kong stocks gained as investors anticipated more supportive government policy in the wake of weak economic data from China. Alibaba rose before its earnings release.

The Hang Seng Index gained 0.9 per cent to 19,727.25 at the close of trade on Thursday. The Tech Index added 1.2 per cent, and the Shanghai Composite Index slipped 0.1 per cent.

Alibaba rose 3.1 per cent to HK$88.10, with its earnings report due later on Thursday. Baidu advanced 1.4 per cent to HK$125.50, and NetEase gained 3.4 per cent to HK$140.80. Semiconductor Manufacturing International Corp surged 3.2 per cent to HK$21.05, China Life rose 3.9 per cent to HK$15.04 and peer Ping An gained 2.6 per cent to HK$56.55.

“The silver lining in the soft [China] data could be further policy support,” said David Chao, global market strategist at Invesco. “We think [China’s central bank] is set to cut to the reserve-requirement ratio soon because of the combination of decelerating credit growth and muted inflation in April.”

Recovery will strengthen gradually, driven by consumption and in turn by gains in labour income, according to Morgan Stanley in a research note released on Thursday. The report added that narrower growth would trigger a more supportive policy response from the government.

Meanwhile, Tencent fell 0.5 per cent to HK$336.60 after profits came in below expectations, rising 10 percent to 25.8 billion yuan (US$3.7 billion). Yet, revenue rose at the fastest pace in more than a year in the first quarter to 150 billion yuan, exceeding a consensus estimate of analysts polled by Bloomberg.

Two companies began trading in China. Defense technology manufacturer Aerospace Nanhu Electronic surged 27 per cent to 27 yuan in Shanghai. Household appliance manufacturer Guangdong Deerma Technology fell 3 per cent to 14 yuan in Shenzhen.