Hong Kong rises on COVID pivot signs, property support; mixed china

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HONG KONG — Hong Kong stocks closed higher for a second day on Monday as China optimized COVID-19 control measures, while regulators outlined a plan to bolster liquidity in the struggling real estate sector , which analysts consider a major turning point.

China A-shares ended lower amid rising domestic COVID-19 cases in the country.

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Hong Kong’s Hang Seng Index gained 1.7%, after rising 7.7% on Friday, and the Hang Seng China Enterprises Index jumped 1.9%.

Mainland China’s top-rated CSI 300 index rose 0.2%, while the Shanghai Composite index edged down 0.1%.

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Mainland Hong Kong-listed real estate stocks were the stars, up 14%.

Major property developers Country Garden and Longfor Group rebounded 46% and 16%, respectively.

Two sources told Reuters that a notice to financial institutions from the People’s Bank of China (PBOC) and the China Banking and Insurance Regulatory Commission (CBIRC) outlined 16 steps to support the industry, including extensions loan repayment.

Inflows through the north trading Shanghai-Hong Kong Stock Connect hit more than 16 billion yuan ($2.27 billion) on Monday.

China on Friday announced 20 measures to ease some of the COVID-19 control policies, while quarantine times for inbound travelers were shortened.

Analysts said the easing of restrictions and the move to help housing finance marked a “major turning point” in China’s economic policies. “These policies help reduce political uncertainty in the market,” said Zhiwei Zhang, chief economist at Pinpoint Asset Management.

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Citi analysts described the measures to support the real estate sector as “pouring rain after a long drought”.

“We consider that the PBoC & CBIRC policy could be a game-changer by being the first comprehensive support policy from central authorities, unlike previous piecemeal steps,” they said.

Geopolitical risks also showed signs of marginal improvement. Chinese leader Xi Jinping and US President Joe Biden are due to meet on the Indonesian island of Bali on Monday ahead of the G20 summit.

In Hong Kong, the Hang Seng Tech Index climbed 1.8%. AIA jumped 3.6% as it is seen as a potential beneficiary of China’s reopening.

Jefferies raised Hong Kong’s weighting to “bullish” following China’s subtle COVID-19 pivot.

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The latest metrics “suggest that a healthy sense of pragmatism has taken hold of authorities following the 20th Communist Party Congress,” Sean Darby, chief global equity strategist at Jefferies, wrote in a note.

Among China A-shares, real estate, healthcare and financial stocks led the gains, rising 3.5%, 3.1% and 1.9%, respectively.

Consumer staples remained subdued, while tourism and transportation shares fell 4.2% and 2.2% respectively, as domestic COVID cases rose, and some investors recorded profits on previous COVID easing bets. ($1 = 7.0452 Chinese yuan) (Reporting by Summer Zhen; Editing by Christian Schmollinger, Ana Nicolaci da Costa, Lincoln Feast and Uttaresh.V)

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