Hong Kong Stocks Gain Some Steam Back After Citigroup Declares China's "Cyclical Bottom Is Here"

Positive economic data for China growth and the approved restructuring of a major property developer lifted stocks in Hong Kong Thursday in the mid-morning session, although most failed to hold onto the gains in the afternoon.

Hang Seng Index was flat by end of the trading day, just 10 basis points higher at 17,212.43 points.

Citgroup Inc. C raised its growth forecast for China to 5% for 2023 from 4.7% previously, citing expected improved retail sales and industrial production and a turn-around in export contraction that has plagued the local economy.

“The cyclical bottom is here, with all eyes on whether organic demand will pick up amid gathering policy momentum,” Citi economist Yu Xiangrong wrote in the bank’s report on the world’s second-largest economy.

Retailers Alibaba Group Holding Limited BABA and Trip.com Group Limited TCOM rose in the morning session but ended around 0.5% lower on the day but JD.com Inc JD was up convincingly by 1% on the day.

Chinese retail spending in the first half of the domestic National Golden Week Holiday in China increased 8.3% while domestic tourism revenues have increased 5% from the same year-ago period according to HSBC Holdings Plc HSBC. Approximately 900 million trips will be made by travelers during this week’s annual 7-day break, China’s Ministry of Culture and Tourism said.

Among exporters and industrial stocks, JD Logistics Inc. ended the day 0.7% higher, telco Coolpad Group Limited CHWTF leaped 6% and Hong Kong IoT mobile provider SIM Technology Group Limited SIMTF jumped 3%.  

Sunac China Holdings Limited SNCNF became the first Chinese property developer to successfully manage to restructure its debt after a Hong Kong court declared that the company could go ahead with the $10.2 billion debt reorganization. The approval comes on the back of a 98% approval vote by Sunac’s creditors two weeks ago. About $5.7 billion of the delinquent bonds are expected to be replaced by new dollar-denominated convertible debt in Sunac.

The developer has fallen to 16th place from 3rd among China’s leading developers by total number of developments under management as part of the long-and-winding saga that resulted in a previous default on dollar-denominated bonds in May 2022.

Investors appeared to sigh with relief at the news and snapped up Sunac stock in the Hong Kong session, with the shares ending the day 6.3% higher. Longfor Group Holdings Limited LGFRY traders hopped on for the ride, rising 1.9%. China Aoyuan Group Limited CAOYF and China Evergrande Group Limited EGRNF, which still remain beset by debt uncertainty, declined however, diving 2.2% and 11%, respectively.