SHANGHAI: China and Hong Kong stocks rose on Monday after Chinese regulators urged listed companies to bolster share prices through “market value management”, while October data showed some signs of possible stabilisation in China’s economy.
China stocks log biggest weekly loss as data disappoints
However, the markets face headwinds next year as Donald Trump’s presidency will likely threaten China’s fragile economic recovery, prompting Morgan Stanley and Goldman Sachs to downgrade their market forecasts.
China’s blue-chip CSI300 Index rose 1.1% by the lunch break, while the Shanghai Composite Index gained 1.2%. Hong Kong’s benchmark index Hang Seng was up 1.2%.
China’s securities regulator published guidelines after market close on Friday, urging the main index constituents - whose shares trade below book value - to take concrete steps to lift prices, including undertaking mergers and acquisitions, employee stock incentive schemes, cash dividend payouts and share buybacks.
China-listed banks, most of which trade below book value, jumped 2.8% and were on track for their best day in a month.
Other sectors with relatively low valuations, including infrastructure and insurance also gained.
Sentiment was also aided by October data showing improvement in retail sales - a bolometer of China’s consumption.
An index of new energy vehicle (EV) makers rose after state media reported that Chinese and European teams reached “technical consensus” in recent trade talks around EVs.
In Hong Kong, property and financial stocks led gains.
Goldman Sachs trimmed its recommendation on Hong Kong shares to “underweight” from “market weight”, saying Hong Kong stocks were cheap but were likely to miss out on the benefits of China’s economic support.
Morgan Stanley downgraded China to slight “underweight” from “equal weight” in its emerging markets coverage, warning that the country’s reflationary battle and US policies “will likely cast a significant shadow over China’s market trajectory in the next 12 months.”
Further US tariff hikes and other restrictive measures against China will create “even stronger headwinds on corporate earnings and market valuation in the coming months.”