Hong Kong stocks advance for a second day on China rate-cut bets as deflation deepens

The Hang Seng Index added 0.1 per cent to 16,314.58 at 11am local time, adding to the 1.3 per cent rebound on Thursday. The Tech Index was little changed while the Shanghai Composite Index climbed 0.4 per cent.

Tencent advanced 1.5 per cent to HK$291.80, Alibaba Group gained 0.8 per cent to HK$71.45 and Meituan added 1.5 per cent to HK$76.75. NetEase jumped 0.8 per cent to HK$142.40 and Trip.com strengthened 1.2 per cent to HK$297.20.

Limiting gains, HSBC tumbled 2.2 per cent to HK$61.60, chip maker SMIC fell 0.5 per cent to HK$17.66 and smartphone maker Xiaomi slipped 1.3 per cent to HK$14.30.

The Hang Seng Index has still lost 1.1 per cent this week, bringing the decline so far this year to 4.1 per cent. At this pace, the city’s stock market is headed for its worst start to a year since a 10 per cent drop in the first two weeks of trading in 2016.

The People’s Bank of China will cut the one-year medium-term lending facility (MLF) by 10 basis points from 2.5 to 2.4 per cent on Monday, according to consensus among analysts tracked by Bloomberg. The central bank is also expected to cut banks’ reserve ratio to inject more liquidity in the system, the forecasts showed.

The central bank last reduced the one-year rate in a surprise move in August last year as growth momentum eased, after delivering a cut in June 2023 and August 2022.

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What Taiwan’s presidential election will mean for China, the US and the world

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“A new round of policy rate cuts is on the horizon,” analysts at Nomura said in a note on Friday. “Beijing has become increasingly concerned about the downward pressure on growth” and the PBoC is likely to deliver two cuts to MLF rates in first half of the year, they wrote.

Consumer prices in China fell 0.3 per cent in December from a year earlier, the third month of decline, while producer prices slumped 2.7 per cent year after a 3 per cent drop in November, the statistics bureau in Beijing said on Friday. Trade reports for December were mixed, with exports rising 2.3 per cent and imports gaining 0.2 per cent in December.

Elsewhere, Wellcell Holdings surged 132 per cent to HK$2.32 per share on its first day of trading in Hong Kong.

Major Asian markets were mixed. The Nikkei 225 in Japan jumped 1.1 per cent to a 34-year high. The Kospi in South Korea dropped 0.2 per cent and the S&P/ASX 200 in Australia was little changed.