Hong Kong shares recovered on Thursday and snapped a three-day losing streak helped by a rebound in Shanghai markets on optimism about easier monetary policy in China and a better-than-expected economic outlook.
The rally could continue into Friday after data on China bank lending for March, released after the market shut, was stronger than forecast, at 1.01 trillion yuan ($160.1 billion)compared with the anticipated 800 billion yuan. That was a sign of traction in China's efforts to ease monetary policy and boost credit creation to support a cooling economy. "That's a really good number. Also, that's the second uptick for money supply growth from the low in January so people are going to ask whether the worst is over for China," said Christian Keilland, head of trading at BTIG in Hong Kong.
China is also expected to release its first-quarter GDP numbers on Friday with economists polled by Reuters in March forecasting Q1 GDP growth at 8.3 percent from a year earlier.
Chinese shares in Hong Kong, particularly the banks, have remained under pressure, despite relatively low valuations, partly on concerns that a slowdown in the property sector and weakening external demand are going to put pressure on the economy.
But the sector, the heaviest on Chinese benchmark indices, saw some fresh buying on Thursday lifting the Hang Seng index up 0.9 percent and the China Enterprises index up 1.5 percent.
On the mainland, the Shanghai Composite posted its biggest daily gain since February 2, up 1.8 percent, while the CSI300 index on which index futures are based, rose 2 percent.
A sub-index of financials in Hong Kong rose 1.1 percent with China Construction Bank and ICBC among the top gainers, climbing 2.2 percent and 1.8 percent respectively. The two were also the biggest boosts to the Hang Seng.
Construction-related sectors such as steel and cement extended their gains after March contract sales from Chinese developers this week have come in better than feared.
China National Building Material was up 3.5 percent this week. Brokerage CLSA upgraded the stock to an "outperform" on Thursday on prospects of higher cement prices in Northeast China.
Shares of contract handset manufacturer Foxconn Holdings slumped 7.4 percent after major customer Nokia forecast losses for the next two quarters as it struggles to revamp its product line.
Foxconn shares fell to their lowest in more than two months and have nearly erased all their gains for the year. Trading activity in Hong Kong, which was light as of midday, jumped in the afternoon session helping turnover rise to its highest since April 3.
Flagging turnover is of particular concern to Hong Kong Exchanges & Clearing, the world's most profitable stock exchange operator, as it still generates the bulk of its revenue from trading commissions.
In the latest sign that HKEx was trying to wean itself away from cash equities and diversify into commodities, a focus area, sources told Reuters that the company was in talks with banks to line up financing for a possible bid for the 135-year-old London Metal Exchange.