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Hong Kong stocks rise in dead cat bounce; China growth fears expected to lead to monthly losses

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Hong Kong Shares rose slightly on Friday after China more than doubled duty-free shopping limits for mainland tourists in the city, sparking some optimism about a revival of growth and consumption in the former British colony. Still, overall sentiment remained subdued, with the benchmark index heading for its first monthly loss since January.

The Hang Seng Index was up 0.6 percent at 17,815.07 at lunchtime. However, the index has lost 1.2 percent so far in June and is on track for its first monthly loss in five months. The Hang Seng Tech Index lost 0.2 percent and the Shanghai Composite Index rose 1 percent.

Sentiment rose after the Chinese Ministry of Commerce announced that the upper limit for duty-free shopping for mainland tourists entering Hong Kong and Macau would be raised from 5,000 yuan to 12,000 yuan (US$1,651). According to the Hong Kong government, the easing of demand is expected to bring the city up to HK$17.6 billion (US$2.3 billion) in additional consumption annually.

Online travel agency Trip.com Group rose 0.5 percent to HK$375.20. Among other top performers, China Unicom rose 4.5 percent to HK$7.23 and BYD Electronic climbed 4 percent to HK$39.25.

Sentiment has been nervous throughout the month as investors dump stocks and invest in government bonds as a safe haven, citing lack of faith in a recovery in China’s economy. The latest data showed a slowdown in earnings growth at industrial companies, falling foreign direct investment and falling property prices. Foreign investors pulled $5 billion worth of onshore Chinese equities in June, the biggest monthly outflow since October, according to HSBC.

“As we have seen, there has been no noticeable improvement in earnings in most sectors,” said Fan Jituo, an analyst at Cinda Securities. “In the next two months, the market will take a breather and move sideways. For this to change, a recovery in earnings and inflows of fresh capital are needed.”

Meanwhile, traders await data expected Friday evening on U.S. personal consumption spending, a preferred inflation indicator of the Federal Reserve. Spending likely rose 2.6 percent in May from the same month last year, down 2.7 percent from the previous month, according to the consensus estimate of economists tracked by Bloomberg.

Shares of three-quarters of the 82 members of the Hang Seng Index fell in June, with Xinyi Solar Holding, auto dealer Zhongsheng Group Holdings and JD Health International among the worst performers, with declines of at least 18 percent.

Three companies began trading on Friday. Laopu Gold, a jeweler, rose 63 percent from its IPO to HK$66.10 and Tianju Dihe Technology, an API service provider, gained 34 percent to HK$111.60. Dida, a ride-hailing platform operator, lost 9.7 percent to HK$5.42.

Other major Asian markets were broadly higher, with Japan’s Nikkei 225 climbing 1 percent, breaking a two-month shaky pattern, while South Korea’s Kospi added 0.1 percent and Australia’s S&P/ASX 200 rose 0.4 percent.

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