Hong Kong stock index soars as US Fed’s dovish stance give investors confidence to swoop in on Tencent shareholder’s divestment

Zhang Shidong
·4 min read

Hong Kong stocks rose to the highest level in three weeks, as the US Federal Reserve’s pledge to keep accommodative monetary policies in place boosted investors’ sentiment, emboldening them to swoop in on the largest stock on the benchmark Hang Seng Index, as it faces a divestment by a shareholder.

The city’s benchmark Hang Seng Index rose 333.27, or 1.2 per cent, to a three-week high of 29,008.07, clawing back its 0.3 per cent decline and more, led by advances in so-called old-economy companies including the insurer AIA Group, and the garments producer Shenzhou International Group Holdings. In China, the Shanghai Composite Index rose by 2.9 points to 3,482.55 while the Shenzhen Composite Index in southern China’s technology hub declined by 0.16 point to 2,257.95.

Sentiment in the market was buoyed after minutes from the US Fed’s March meeting showed that policymakers have agreed to see more headway on the economic recovery before they taper the bond-purchasing programme, a strategy that aims to keep debt yields and borrowing costs low. Meanwhile, they also played down the fall out of rising bond yields that have been fuelled by the inflation outlook, saying that it is a reflection of a resilient growth outlook.

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“Ample monetary and fiscal stimulus, combined with hopes that the vaccine roll-out will accelerate globally are encouraging investors to allocate more of their assets into stocks at the expense of bonds,” said Luca Paolini, chief strategist of Pictet Asset Management. “We don’t expect this pattern to change in the near term.”

The uptick in Hong Kong stocks tracked a moderate gain that pushed up the S&P 500 index by 0.2 per cent to a record close in overnight trading. Other major markets in Asia were mixed on Thursday, with benchmarks rising in South Korea, Taiwan, Indonesia and Australia. The Nikkei 225 index declined on the Tokyo Stock Exchange.

In Hong Kong, AIA shares rallied 6.2 per cent to HK$99.10, its biggest one-day advance in five months after Morgan Stanley boosted the share-price estimate of the insurer by 46 per cent, citing its expansion in China. Shenzhou rose 7.1 per cent to HK$170.90 while China Mengniu Dairy climbed 4.4 per cent to HK$45.90. Budweiser Brewing Company Asia Pacific rose 3.5 per cent to HK$24.90, amid optimism that beer sales would resume growing with the onset of summer and easing of Covid-19 restrictions.

Tencent, the world’s largest games publisher and the largest stock on the Hang Seng, fell by as much as 2.5 per cent to the lowest intraday level in four days at HK$614, after its biggest shareholder Prosus said it would pare its stake by 2 per cent to 28.9 per cent. The stock clawed back some of its losses to close 1.5 per cent lower at HK$620, as investors swooped in to pick up the shares of China’s largest technology company.

The number of shares transacted jumped to a record 247.4 million, including the 191.89 million shares that Prosus said it would divest. Before today, 21.8 million Tencent shares changed hands every day on average in the past 12 months. Prosus, listed in Amsterdam and Johannesburg, is raising US$14.7 billion from the its divestment of Tencent shares on a 5.5 per cent discount to the stock’s last closing price. The proceeds from the stock sale would be used to fund expansion of Prosus’ online businesses, according to a statement yesterday after the market closed.

On the mainland, two stocks began trading for the first time on the Science and Technology Board in Shanghai, also known as the Star Market. Chengdu Zhimingda Electronics, which makes embedded computers for the military, jumped 213 per cent from its initial public offering price to 107.98 yuan. Zhiyang Innovation Technology, a manufacturer of electrical power equipment surged 117 per cent to 24.65 yuan.

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