A gauge of China tech shares traded in Hong Kong closed just shy of entering a technical bull market over expectations of further stimulus for the nation’s flagging economy.
The Hang Seng Tech Index climbed 2.9%, extending gains from a May low to 19.7%. While shares had been lifted in recent months thanks to easing regulatory constraints and stimulus hopes, a 34% surge in XPeng Inc. after investment plans by Volkswagen AG propelled the gauge higher. Peers including Nio Inc. and Li Auto Inc. also advanced.
The rally comes on the heels of a Politburo meeting earlier this week, where China’s top leaders pledged more policy support to boost consumption and the ailing real estate sector. That led to a 6% surge in the index on Tuesday, the most in almost five months.
“Market sentiment is improving with clearly supportive rhetoric from the government over the past week,” said Vey-Sern Ling, managing director at Union Bancaire Privee. “VW’s investment in XPeng also boosted investor appetite for the EV sector.”
Chinese tech stocks have had a volatile year, weighed by scars from the years-long crackdown on private enterprises as well as tense US-China relations. Worries about a consumption slowdown, partly due to record-high youth unemployment rate, have hit the nation’s Internet giants which rely on ad spending and revenues from online shopping and gaming.
For its part, the Hang Seng Tech Index is up more than 5% this year, with traders attributing the gain this week partly to investors covering their short bets. That’s compared with a 42% surge in the Nasdaq 100 Stock Index year to date.
But the Chinese market may finally be in for a turnaround. On Wednesday, analysts at Goldman Sachs Group Inc. wrote that even with structural growth concerns, the Politburo readout suggests that “the policy put has been activated” and that the window is open for a tactical bounce. In a separate note on Thursday, the Wall Street bank said that hedge fund clients net bought Chinese stocks at the fastest clip in nine months after the meeting.
Brokers including Morgan Stanley say that swift follow-through of actionable policy measures is now needed to ensure the rally can hold.
Meanwhile, Hong Kong’s benchmark Hang Seng Index closed up 1.4%, while a gauge of Chinese shares traded in the financial hub rose 1.9%. In a sign of profit-taking, mainland investors net sold HK$3.68 billion ($472 million) of Hong Kong stocks, after buying HK$7.78 billion on Wednesday.
Bearish Sentiment Persists: Investors Lose N112 Billion on NGX
Drastic Decline in FGN Bond Listings Raises Concerns Over Government Borrowing
Data from the Nigerian Exchange Limited (NGX) has shown that the value of listed Federal Government of Nigeria (FGN) Bonds on the exchange experienced a decline of 99.9% in the eight months ending on August 31, 2023.
Plummeting from N1.6 trillion recorded during the corresponding period in 2022 to a mere N148.2 billion.
The stark contrast in FGN Bond listings between the two years has raised eyebrows and prompted experts to delve into the implications of this significant shift.
Analysis of NGX data revealed that the bonds listed this year primarily consisted of the FGN Savings Bond and Sukuk, whereas the previous year featured a combination of both Federal Government Bonds and Savings Bonds.
Among the listings, the FGN Sukuk stood out with the highest recorded value of N130 billion for the period under review.
Analysts have identified several factors contributing to the stark decline in FGN Bond listings.
David Adonri, an analyst and Vice Executive Chairman at HighCap Securities Limited, commented on this development, and said, “The reduction of FGN Bond listing could be an indication that the government borrowed less in the domestic market, and its implication is that it could affect liquidity in the secondary market.”
He continued, “The decline could also be that the FGN Bonds were not listed on the Exchange during the period under review as only the Savings Bonds were captured as well as Sukuk.”
Adonri highlighted concerns about the country’s debt profile, both domestically and internationally, saying, “Both externally and internally, the immediate past government had taken more debt. This is increasing the risk of sovereign default and economic nightmares.” He also noted the adverse effects on the real sector, explaining that “the borrowing has now reached the alarming point of crowding out the productive real sector.”
Tajudeen Olayinka, an Investment Banker and Stockbroker, echoed similar sentiments, saying, “If there was an increase in debt listings in the market, it brings about increased liquidity and trading activities in the market, but the drop in the eight-month period could be largely as a result of higher yields in other competing instruments.”
Olayinka also speculated that “the drop in the FGN Bond listing could also be that there was less borrowing by the government in the primary market so not much to offer for listing in the secondary market.”
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