Market rallies past 17,000 as sentiment improves

Hong Kong stocks jumped above 17,000 points as sentiment improved despite Fitch Ratings’ cut in its outlook of China amid concerns about the growing burden of government deficits.

The Hang Seng Index closed 311 points higher, or 1.9 percent, to 17,139 points yesterday. The Shanghai Composite Index, however, dipped 0.7 percent.

Fitch Ratings revised China’s outlook to negative from stable yesterday, saying the government is likely to pile on debt as it seeks to pull the economy out of a real estate-driven slowdown. The downgrade follows a similar move by Moody’s in December.

China’s Ministry of Finance responded that the goal of 3 percent government deficit is overall “appropriate and reasonable” and will benefit the economy to grow steadily. The authority said it was a pity to see the cut as the rating agency failed to foresee the gains that the expansionary fiscal policies could bring.

In Hong Kong yesterday, tech stocks led a rally buoyed by share buybacks in the sector and China’s latest batch of online game approval.

Tencent (0700) climbed 3 percent as it continued its share repurchase plans while Alibaba (9988) rose 4.9 percent.

Ping An Insurance (2318) inched up 0.6 percent although a trust under the insurer missed repayment due two weeks ago, involving about 772 million yuan (HK$836 million), as the invested property project in Xiamen reported sluggish sales.

Shares of China Vanke (2202) lost 4.3 percent as the developer said a regional manager in the city of Jinan was assisting an investigation. A regional manager, Xiao Jing, is cooperating in a probe over “personal reasons,” the company’s Jinan unit said.

While Vanke offered few details, the news came after the developer denied allegations made by some Shandong-based partner companies over the company and its chairman. The accusations included money laundering and tax evasion.

NetEase (9999) edged higher by 0.8 percent after announcing the resumption of cooperation with Blizzard Entertainment to redistribute its games in China.

Chinese sportswear brand 361 Degrees (1361) rose 6.8 percent on the strong first-quarter sales.

Fashion retailer Esprit (0330) extended its gain by 65.7 percent yesterday on a potential partnership with an international private equity group in its European businesses.