A gauge of China tech shares traded in Hong Kong extended gains from a May low to 20% on expectations of further stimulus for the nation’s flagging economy.
Hong Kong’s Hang Seng Tech Index jumped as much as 3.3% on Thursday, led by XPeng Inc. after plans by Volkswagen AG to invest in the Chinese electric vehicle maker. Its peers including Nio Inc. and Li Auto Inc. also gained.
The rally — which puts the tech index on track to enter a technical bull market — comes on the heels of the Politburo meeting earlier this week, which pledged more support to boost consumption and the ailing real-estate sector.
“Market sentiment is improving with clearly supportive rhetoric from the government over the past week,” said Vey-Sern Ling, managing director at Union Bancaire Privee. “VW’s investment in XPeng also boosted investor appetite for the EV sector.”
Chinese tech stocks have had a volatile year, weighed down by scars of the years-long crackdown on private enterprise as well as tense US-China relations. Worries about a consumption slowdown partially due to record-high youth unemployment rate have hit Internet giants in the nation dependent on ad spending and revenues from online shopping.
The Hang Seng Tech Index is up about 5% this year, with traders attributing the jump this week partly to investors covering their short bets. That’s compared with a 42% surge in the Nasdaq 100 Stock Index year to date.
Even as Chinese markets rebounded after the Politburo vows, brokers including Morgan Stanley say that swift follow-through of actionable policy measures is needed to ensure the rally can hold.
Meanwhile, Hong Kong’s benchmark Hang Seng Index gained as much as 1.7%, while a gauge of Chinese shares traded in the financial hub rose 2.3%. In a sign of profit-taking, mainland investors net sold HK$1.56 billion ($201 million) of Hong Kong stocks as of 11:12 a.m. local time, after buying HK$7.8 billion on Wednesday.
