Hong Kong stocks boosted by easing trade tensions, economic policy support

Hong Kong shares rebounded on Monday after two straight sessions of losses amid cautious optimism that China and the United States will work out a trade deal, and as Chinese officials boosted investor hopes of policy support for a slowing economy. At the close of trade, the Hang Seng index was up 274.88 points, or 0.97 per cent, at 28,503.30, having lost 1.9 per cent on Friday. The Hang Seng China Enterprises index rose 1.08 percent to 11,276.91. 

The sub-index of the Hang Seng tracking energy shares rose 0.3 per cent, the IT sector gained 2.3 per cent, the financial sector ended 1.01 per cent higher and the property sector rose 0.17 per cent.

Gains were helped by cautious optimism among investors that Washington and Beijing will hammer out a deal to eliminate tariffs. A senior Chinese official said on Saturday that China and the United States were still working day and night to achieve a trade deal. But there remains little clarity on when the leaders from the two countries can meet to seal any deals.

Underscoring expectations that Beijing will continue to offer policy support in a slowing economy, People's Bank of China (PBOC) Governor Yi Gang said on Sunday that the central bank's "prudent" monetary policy would emphasise counter-cyclical adjustments, using a phrase that implies the need to fight an economic slowdown.

Yi said there was still some room for the PBOC to cut reserve requirement ratios, and that the bank would work on lowering risk premiums that have kept lending rates for small firms relatively elevated.

"The effectiveness of government policy stimulus has proven to be better than what the market had expected, as shown in Jan's bank lending and Total Social Financing growth, and also in the improvement in Feb Caixin PMI ... and new orders/business condition outlook of official PMI," analysts at Morgan Stanley said in a note, noting that Chinese indexes, including the Hang Seng, had outperformed in the year to date.

The top gainer on the Hang Seng was Sino Biopharmaceutical Ltd, which gained 6.25 per cent, while the biggest loser was Geely Automobile Holdings Ltd, which fell 1.56 per cent. 

China's main Shanghai Composite index closed up 1.92 per cent at 3,026.99 points, while the blue-chip CSI300 index ended up 1.98 per cent. Around the region, MSCI's Asia ex-Japan stock index was firmer by 0.47 per cent, while Japan's Nikkei index closed up 0.47 per cent.

The yuan was quoted at 6.7257 per U.S. dollar at 08:27 GMT, 0.08 per cent weaker than the previous close of 6.72. The top gainers among H-shares were Huatai Securities Co Ltd, up 4.83 per cent, followed by China Gas Holdings Ltd, gaining 4.35 per cent, and China Tower Corp Ltd, up by 3.91 per cent.

The three biggest H-shares percentage decliners were China National Building Material Co Ltd, which was down 1.09 per cent, Dongfeng Motor Group Co Ltd, which fell 0.7 per cent, and China Railway Group Ltd, down by 0.5 per cent.

(With inputs from agencies.)