While the trade tensions with the United States appear to be escalating and scandal rocks the pharma sector, the Chinese government is attempting to lift its economy by the announcement of a series of new measures. Following this, the markets in Hong Kong and mainland China saw a rise in response.
Adoption of a “more proactive fiscal policy” was announced by the State Council, the state cabinet. It also said hat it would hasten the raising and spending of 1.35 trillion yuan (about $199 billion) for the local governments to spend on infrastructure.
And with the aim of recovering yuan and the scandal-hit pharmaceutical sector, 500 billion yuan (US$73.57 billion) was also injected into the banking system by Beijing.
“A-share investors believe the government is going to use infrastructure investment to boost the economy, and counter the negative impact of the trade war with the US,” said Francis Lun, chief executive of Geo Securities.
Infrastructure companies drove the 400-point boom in mainland markets on Tuesday, he said. “The central bank injected 500 billion yuan into the banking system, and issued directives that the banks should buy A minus corporate bonds to help the liquidity of these second-line companies,” said Lun.
China Railway rose by 10.5 per cent to HK$6.74 and China Rail Construction jumped by 13.7 per cent to HK$9.4. Anhui Conch Cement gained 8.2 per cent to HK$49 and China Communications Construction jumped by 11.9 per cent to HK$8.4.
There was a rise of 1.44 per cent, or 406.45 points, to 28,662.57 for the Hang Seng Index in Hong Kong while there was an increase of 2.26 per cent, or 242.56 points, to 10,973.92 in the Hang Seng China Enterprises Index, or the H-share gauge.
With a turnover of HK$15.58 billion, the top performers were banks which continued with the rising trends of Monday. This was after the market was p rovided some support and strength by stability in the yuan and the long-awaited guidelines on the wealth-management products of the commercial banks.
There was an increase of 3.38 per cent to finish at HK$5.8 for the Industrial and Commercial Bank of China. On the other hand, a rise of 3.2 per cent to HK$7.1 was noted by China Construction Bank. The HSBC surged by 1.7 per cent to HK$74.65 and the Bank of China (Hong Kong) rose noted a rise of 2.3 per cent to HK$37.6.
There were minor gains and losses in the pharma sector as it took a back seat following the sharp fall in stocks of the sector after the revelation of a scandal involving the Changsheng Bio-technology which is Shenzhen-listed company which was discovered to tampered with data for inspection and production of its rabies vaccines.
“They have a cloud hanging over them – nobody has any faith in Chinese pharmaceuticals,” said Geo Securities’ Lun.
(Adapted from SCMP.com)