Chinese Stocks in Hong Kong Resume Rally as Travel Data in Focus

(Bloomberg) — Chinese stocks in Hong Kong are back to rallying after a one-day dip, with investors pinning hopes that data on the nation’s holiday spending will provide more impetus for the market.

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The Hang Seng China Enterprises Index climbed as much as 2.8% on Friday. The gauge closed down 1.6% in the previous session following a 13-day winning streak but is up more than 35% from a September low. Mainland Chinese markets remain closed through Monday for the Golden Week holidays.

Beijing’s stimulus package has unleashed a wave of buying since last week, with traders now assessing the sustainability of the fastest pace of gains since November 2008. Strategists at BlackRock Inc. are among those who have turned bullish on the once beaten-down market, while some others want to see details of fiscal stimulus and data on holiday spending for further confidence.

“The change in the direction and mindset of authorities to me is really important,” but we are looking forward to how consumers have reacted in the Golden Week holiday, and how the government follows up on fiscal support, Tai Hui, APAC chief market strategist at JPMorgan Asset Management, said in a Bloomberg TV interview. “That would be a key factor in sustaining the rally that we have seen so far.”

Leisure travel demand during the Golden Week holidays has been resilient, with travel traffic gaining momentum, Citigroup Inc. analysts said. China saw 21.4 million railway trips on the first day of the holiday, a record single-day volume, state news agency Xinhua reported, citing China State Railway Group.

Shares of e-commerce firms Meituan and Alibaba Group Holding Ltd. were the top contributors to gains on the HSCEI gauge on Friday.

While overall sentiment has clearly turned for the better following China’s interest-rate cut, liquidity support for the equity market, and relaxed home-purchase rules in major cities, some voices of caution have started to emerge as the rally extends.

Economists at Nomura Holdings Inc. have warned that “a stock market mania would be followed by a crash, similar to what happened in 2015” in the most gloomy scenario. That outcome may have a “much higher probability” than more optimistic scenarios, they wrote.

–With assistance from Shery Ahn, Haidi Lun and Abhishek Vishnoi.

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