Hong Kong stocks rally 1% as investor sentiment recovers
Hong Kong and Chinese equities markets and commodities climbed on Tuesday, building on a rebound from recent lows as investors weigh the economic and corporate hit from the coronavirus outbreak.
Hong Kong’s Hang Seng index led the way, climbing 1.2 per cent in its first gain in the past three trading sessions. The CSI 300 barometer of stocks traded in Shanghai and Shenzhen climbed about 0.7 per cent.
The CSI 300 has rallied almost 8 per cent in the past six sessions, with the Hang Seng up around 5 per cent over that period. Both indices still remain around 5 per cent below their January peaks.
Brent crude, which has been hit recently by concerns that the outbreak will subdue demand in China, climbed 1.4 per cent on Tuesday to $53.99 a barrel. Copper, an important industrial metal seen as an economic bellwether, rose 1 per cent in early London Metal Exchange dealings, according to Bloomberg data.
Goldman Sachs said on Tuesday that “risk appetite” among investors has bounced back as “virus concerns fade.”
“The timing of the recovery is broadly in line with past epidemics, when equity recovered about three to four weeks from the outbreak,” the New York bank said.
“Additionally, our emerging markets team has found that Google searches peaked last week, which historically marked the trough in risky assets.”
Still, many investors remain deeply uncertain about the effect of the crisis on China’s economy — the world’s biggest emerging market.
Citigroup on Monday slashed its forecast for Chinese economic growth in the first three months of 2020 to a year on year rate of 3.6 per cent, from an earlier forecast of 4.8 per cent. It also trimmed its outlook for the year by 0.2 percentage points to 5.3 per cent.
“Wider and faster spread of novel coronavirus requires a reassessment of its economic impact,” the lender said, noting that developments since the end of January had been “worse than we had anticipated.”
Despite some initial positive signs like the decline of new suspected and confirmed cases, the unknown features of 2019-nCoV such as uncertainties about the incubation period, false negative results in testing and undetected channels for contagion suggest the turning point will be still days, if not weeks, away, not to mention the risk associated with the post-holiday massive transit.