(Bloomberg) — Hong Kong stocks played catch-up to gains in global equities as trading resumed after the Lunar New Year holidays, with a rally in financials outweighing the impact of an overnight tech rout in the U.S.
The Hang Seng Index jumped as much as 2.7% on Friday, on track for its biggest such post-holiday jump since 2009, according to data compiled by Bloomberg. HSBC Holdings Plc and AIA Group Ltd. were among those leading gains. The Hang Seng Tech Index also climbed 2.7% before paring some of its advance. Mainland China markets will reopen on Monday.
Global equity markets have endured volatility while Hong Kong was closed. While that led some to expect fluctuations as trading in the city’s shares resumed, the benchmark equity index has got a boost from financial stocks after a hawkish pivot by central banks in Europe brightened the outlook for the sector on higher rates. Gains were also seen in certain sectors linked to the Winter Olympics, such as sportswear brands.
There is “more upside” possible in the medium term as China eases monetary and fiscal policies further to support economic growth, said Steven Leung, executive director at UOB Kay Hian Hong Kong Ltd. A positive open is very likely to make “the Hang Seng Index test 24,500 level,” which is around the gauge’s 100-day moving average, he said.
Hang Seng’s gains come after shares of Chinese companies listed in the U.S. advanced during the holiday period. The Nasdaq Golden Dragon China Index — which includes many large Chinese technology firms — has jumped 5% since Hong Kong last traded on mid-day Monday, helped in part by encouraging commentary from the country’s cyberspace watchdog.
Equity benchmarks in Seoul, Singapore and Kuala Lumpur on Thursday had all posted post-holiday jumps, providing some reassurance for a positive open in Hong Kong. The U.S. tech selloff Thursday also showed signs of easing in late trading after Amazon.com Inc. and Snap Inc. soared on quarterly results.
Yet there are significant threats to a sustained recovery in Hong Kong and mainland stocks, even as an increasing number of global banks turn bullish on them.
Some investors continue to sell into rallies, China’s property market distress remains acute and the slowing pace of economic growth continues to weigh. Positive statements toward the technology sector have yet to undo the damage inflicted on the business models of many internet platforms over the past year.
On top of all this, the mainland’s CSI 300 Index entered a bear market last week despite Beijing’s efforts to bolster confidence going into the holiday, and the central bank’s earlier pivot to stimulus.
Hong Kong’s Hang Seng Index had fallen into a bear market much earlier, in August, and remains down more than 20% from its peak in February last year.
“It will be a wild ride in fits and starts,” said Wai Ho Leong, a strategist at Modular Asset Management. Overvalued big tech stocks are “the most vulnerable to corrective bouts,” he said, pointing toward the volatility seen in Nasdaq 100 Index in recent days.
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