Hong Kong stocks relinquished much of their early gains on Monday, indicating a possible return to caution in the market after the benchmark index came close to entering a bull market.
The Hang Seng Index ended the session with a 0.5% increase, marking a sixth consecutive day of gains, following an initial surge of up to 2.2%. This intraday movement brought the index’s rally to over 20% from its low point in January.
“I suspect it is likely due to profit-taking after consecutive sessions of daily positive gains,” said Kelvin Wong, a market analyst at Oanda Asia Pacific Pte. He added that traders may have pulled back in anticipation of China’s factory data release on Tuesday.
The recent rebound in Hong Kong stocks has made them some of the best-performing globally this month. One money manager noted that cautious optimism is driving this turnaround after years of losses.
However, the quick pullback on Monday indicates that investors are still looking for evidence of policy support before continuing to buy stocks, with an upcoming Politburo meeting expected to be a key indicator.
The rally has already pushed other indexes in China and Hong Kong into technical bull markets in recent weeks.
Initially fueled by strong inflows from the mainland and a rotation by global funds into relatively cheap Chinese internet stocks, the market now shows signs of exuberance.
Shares of China’s struggling property developers stood out on Monday, surging amid expectations of more policy support at the anticipated meeting of China’s top leadership later this week. Even companies in default saw gains, with Shimao Group Holdings Ltd. jumping 61%.
A Bloomberg Intelligence gauge of builders’ shares recorded its largest increase since November 2022, as sentiment was boosted by a major developer reaching a restructuring agreement with bondholders.
Additionally, news of a major city easing home purchase restrictions raised expectations of further relaxation measures.
“People are getting excited over a potential shift in policy mindset toward the property sector,” said Zhang Hao, chief investment officer at Granford (Beijing) Capital Management Co.
“The rally in Hong Kong today is really driven by these hopes, and it could have more legs as valuations have been depressed for such a long time.”
