Hong Kong and Chinese mainland stocks extended their winning streak to four straight days on Monday, buoyed by Beijing’s ambitious policy to transform Shenzhen into a model city for the country and the world, as well as by a national plan to reform interest rates and lower borrowing costs.
The flagship Hang Seng Index advanced more than 2 percent, or 557.62 points, to close on Monday at 26291.84, the highest since July 19. Hang Seng China Enterprise Index, a benchmark tracking Chinese mainland companies listed in Hong Kong, rose 1.45 percent to 10109.15.
On the mainland, the Shanghai Composite Index gained 2.1 percent to finish at 2883.10, the biggest gain since July 1. The Shenzhen Composite Index, which tracks stocks on the mainland’s second exchange, ended Monday’s trading up 2.96 percent, or 268.05 points, at 9328.97.
In a sign of its determination to make Shenzhen — the poster child of China’s economic miracle of the past four decades — a new engine of the nation’s further reform and opening-up, Beijing announced on Sunday wide-ranging favorable policies, including privileges in yuan internationalization.
Riding high on the news, Hong Kong-listed Shenzhen Investment Ltd, a property developer partly owned by the Shenzhen government, jumped 11.2 percent on Monday.
Over the weekend, China’s central bank said it will introduce a new reference rate — the loan prime rate — in the most significant market-based interest rate reform over a decade, and one that will essentially cut down on borrowing costs for small businesses and households.
The markets were also lifted up by comments from Larry Kudlow, US President Donald Trump’s top economic adviser, who hailed “positive” trade talks with top Chinese negotiators over the weekend.
A slew of positive news has offered relief to the Hong Kong stock market, which has been weighed down by more than two months of protests against proposed changes to the city’s extradition law.
In its latest report released on Monday, Jefferies believed there is “limited downside in the stock market from here, even if the protests drag on”.
“Hong Kong is facing a crisis almost unprecedented in its history. Since we do not see an immediate solution, the outlook for retail and tourism could get much worse,” the brokerage firm said. “But Hong Kong has always bounced back from crises. It recovered from the 1998 Asian financial crisis, the 2003 SARS epidemic and the 2009 global financial crisis.”
The hard-pressed retail sector, however, will continue to get hit the hardest. At the end of 2019, the industry will see a year-on-year plunge of 34 percent, Jefferies predicted.
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