Hong Kong Stocks Rally on U.S. Deal Hopes, China Muted Before Earnings

© Reuters.

By Ambar Warrick

AiVIF.com-- Hong Kong stocks surged on Friday, buoyed largely by technology stocks on hopes of an auditing deal between Washington and Beijing, while Chinese stocks traded sideways ahead of a slew of major earnings.

Hong Kong’s Hang Seng index surged 0.8% after the Wall Street journal reported that the U.S. and China are nearing a deal that could see American auditors travel to Hong Kong to inspect records of U.S.-listed Chinese firms.

The deal would benefit U.S.-listed firms facing scrutiny from Washington over potential conflicts of interest with China- fears of which have dented valuations this year.

Hong Kong shares of  Alibaba (HK:9988), Baidu Inc (HK:9888) and Jd Com Inc (HK:9618) jumped between 1.3% to 4% after the report. 

But Chinese stocks were muted as a stimulus-led rally appeared to have run out of steam. Investors were awaiting earnings from some of the biggest stocks in the country.

The bluechip Shanghai Shenzhen CSI 300 index and Shanghai Composite index both rose less than 0.1%. 

Sentiment towards Chinese stocks was also soured by a U.S. diplomat’s landing in Taiwan, which could draw ire from Beijing and worsen Sino-U.S. ties.

Majors including China Petroleum & Chemical Corp (SS:600028), Bank of Communications Co (SS:601328), People’s Insurance Group of China Co Ltd (HK:1339), and several other financial and real estate heavyweights are set to report earnings later in the day. 

Hong Kong shares of PetroChina Co Ltd (HK:0857), the country’s biggest oil and gas producer, jumped over 3% after the firm logged record profits in the first half of 2022. The firm also flagged improving Chinese crude demand, citing recent stimulus measures.

Broader Asian stocks rose on Friday, but were set for a muted weekly performance as caution kicked in ahead of more developments in U.S. monetary policy.

Federal Reserve Chair Jerome Powell is set to provide more clues on the bank’s hawkish stance in his address to the Jackson Hole Symposium later on Friday. 

Any affirmation of more hawkish action is likely to dent risk-driven markets.