China bull extends gains for HSI

UBS raised its ratings for Chinese equities to overweight, helping Hong Kong stocks extend a rally yesterday but warned profit growth at US tech giants will slow.

That bullish outlook is based on strong customer spending during holidays, and the overperformance of the listed consumer companies, said Sunil Tirumalai, global emerging market chief equity strategist at the Swiss investment bank.

It comes as mainland equities have rebounded in recent months, with the MSCI China Index up more than 13 percent since a January trough and the Hang Seng Index about 12 percent higher.

In addition to earnings, the strategists highlighted tailwinds from the so-called “national team” – state-related funds that intervene in the stock market – and a slew of positive surprises on dividends and buybacks from local firms.

Their revisions, which also included raising Hong Kong stocks to overweight, stand out as brokerages have been reluctant to boost their index targets or raise recommendations this year.

Yesterday, the HSI jumped 317 points, or 1.92 percent, to 16,828.93, extending Monday’s rally. Mainboard turnover hit HK$116 billion.

The tech gauge climbed 3.38 percent, as Meituan (3690) advanced nearly 8 percent and JD.com (9618) grew 6 percent, the two best-performing blue-chip members.

In the United States, UBS projected growth in earnings per share for the “big six tech” stocks – Apple, Amazon, Alphabet, Meta, Microsoft, and Nvidia – to decline to 15.5 percent by the first quarter of 2025, from a 42.2-percent estimate over the same period this year.

JPMorgan also said the slide in US equities over the past three weeks was the start of a selloff that is likely to deepen along with mounting macroeconomic risks, including rising treasury yields, a strong dollar and elevated oil prices

In other news, Hong Kong plans to hold promotional events in the city, the mainland and overseas, as this year is the 10th anniversary of connect schemes.

The onshore yuan dropped by a further 30 basis points to 7.2466 per US dollar yesterday, a new low for over five months.