Hong Kong stocks rebound after soft PMI data triggers stimulus hopes

Hong Kong stocks rallied as investors bet Beijing will deploy more stimulus measures in the world's second largest economy after China reported weak manufacturing data. The city's biggest lender HSBC led gains ahead of its earnings.

The Hang Seng Index jumped 1.9 per cent to 17,326.58 as of local noon trading break, clawing its way back from three-month lows. The Tech Index jumped 2.9 per cent, while the Shanghai Composite Index gained 2.1 per cent, the biggest jump in three months.

HSBC Holdings jumped 1.5 per cent to HK$67.85, leading gains among the financial sector, before it announced a US$3 billion buy-back plan and better-than-expected earnings. Hang Seng Bank added 1.8 per cent to HK$103.40 ahead of its estimate-beating earnings.

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Tencent jumped 3 per cent to HK$364.20, NetEase advanced 3 per cent to HK$146.90 and Alibaba added 2.1 per cent to HK$77.80, leading gains among tech heavyweights.

Factory activity in mainland China contracted for the third straight month, with the official PMI manufacturing index released on Wednesday dropping to 49.4 from 49.5 in June. A reading below 50 indicates contraction in economic activity.

The non-manufacturing gauge fell to 50.2 from 50.5 from the previous month, missing the consensus estimate of 50.3.

The soft PMI readings point to a "further slowdown" in the second half, after the lower-than-expected growth in the second quarter, Nomura economists including Ting Lu said in a note on Wednesday. That could give Beijing more reasons to strengthen countercyclical policy action, they added.

"We expect more meaningful policy measures after September, when concerns over the growth slowdown may become more elevated," they wrote.

Today's gains helped reduce the Hang Seng Index's losses this month to 2.2 per cent, following June's 2 per cent decline. That brought the cumulative decline to 11.8 per cent since the gauge peaked in May and drove its 14-day relative strength index (RSI) to near 30 on its charts, a signal interpreted by technical analysts as oversold conditions in stocks.

Adding to gains on Wednesday, EV maker Li Auto jumped 3.6 per cent to HK$76.25 and BYD added 1.6 per cent to HK$228.40, after its peer Xpeng expanded its autonomous driving system to take on Tesla.

Elsewhere, Zhejiang Liju Thermal Equipment, a heat equipment manufacturer and distributor, surged 53 per cent from its IPO price to 61.36 yuan per share on its first day of trading in Shanghai.

Other Asian markets were mixed. Japan's Nikkei 225 lost 0.1 per cent after the country's central bank lifted interest rate to 0.25 per cent. South Korea's Kospi added 0.5 per cent and Australia's S&P/ASX 200 gained 1.3 per cent before the Fed's meeting later today.

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