The rally in Chinese stocks extended after the Lunar New Year holidays as spending and tourism data suggested a recovery is gaining traction in Hong Kong and on the mainland.
(Bloomberg) — The rally in Chinese stocks extended after the Lunar New Year holidays as spending and tourism data suggested a recovery is gaining traction in Hong Kong and on the mainland.
The Hang Seng China Enterprises Index gained as much as 2% Thursday, while the benchmark Hang Seng Index rose 1.8% to head for its highest close since April. Onshore markets remain closed for the rest of this week.
Traders were emboldened as China’s Lunar New Year travel and box office data showed a strong revival in demand, with the latter exceeding pre-pandemic levels, as the nation moves on from Covid Zero. The holiday period also saw tourism recover in Hong Kong and Macau as cross-border travel revved up.
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“We are tactically bullish on China stocks. I think what we might see in the months ahead is improvement in many of these activity indicators,” Chetan Seth, Asia-Pacific equity strategist at Nomura Holdings Inc. said in a television interview on Bloomberg. An earnings recovery will “give another kind of boost to stocks prices,” he added.
The global equities backdrop is also supportive. Tech stocks drove US equities higher earlier this week as investors await the release of key earnings, and as comments by Federal Reserve officials dialed back fears of overly aggressive policy moves. The Nasdaq Golden Dragon China Index rose 1.4% over the past three sessions.
With Thursday’s gains, the Hang Seng Index as well as the Hang Seng China gauge are set to rally for six straight weeks, boosted by the economic reopening and pro-growth policies.
If the upbeat mood continues, the CSI 300 benchmark may enter a bull market when shares resume trading on Monday. The gauge has surged a little more than 19% since its late October trough.
Onshore shares have trailed gains seen in Hong Kong in the latest rebound, suggesting they have more room to advance especially as offshore peers reach overbought levels. The Hang Seng China Enterprises Index’s relative strength index is at around 75, exceeding the 70 threshold that indicates an asset is technically overvalued.
–With assistance from Aya Wagatsuma, Kathleen Hays and Paul Allen.
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