ASIA STOCKS: China & Hong Kong Equities Surge Ahead Of NPC
Mar-06 03:00
Chinese and Hong Kong equity markets opened on a strong note today, buoyed by optimism following a positive National People's Congress (NPC) meeting and anticipation of further supportive policy measures. The Hang Seng China Enterprises Index surged as much as 2.6%, reflecting heightened investor expectations ahead of a joint press conference by Chinese government ministries scheduled for 3 PM local time. Key officials, including the heads of the state economic planner, finance ministry, commerce ministry, central bank (PBOC), and securities regulator (CSRC), are expected to provide insights into the policy outlook, with potential extensions of monetary support likely to further fuel the rally.
- In Hong Kong, the Hang Seng Index climbed 2.4%, erasing losses triggered earlier in the week by a 10% US tariff hike announced on Tuesday. The index is on track for its highest close since February 21, 2022. The HS Tech Index outperformed, rising as much as 4.20%. On the mainland, the CSI 300 Index gained up to 1.1%, while the Shanghai Composite Index advanced 0.8%.
- Alibaba Group Holding led gains, soaring 7.5% after unveiling its latest open-source reasoning model, QwQ-32B, which boasts performance comparable to DeepSeek’s R1 model despite having far fewer parameters (32 billion vs. 671 billion). Alibaba’s shares have now rallied over 70% from their January low, driven by optimism around its AI potential. While other AI-related stocks also saw significant gains: Kingdee International Software soared 14%, SenseTime added 4.8%, and Lenovo climbed 5.4%.
- Chinese education stocks also gained traction after the NPC vowed to expand high school capacity and promote vocational-academic integration. New Oriental Education & Technology rose as much as 5.3% with Citi analysts noting its strong position in senior high school credentials. China New Higher Education advanced 2.7%, and Doushen Beijing Education gained 5.1%. The report’s mild language on the "Double Reduction" policy signaled a shift from crackdowns to stabilization, further supporting the sector.
- Morgan Stanley strategists, remain positive on offshore Chinese equities, citing China’s improved preparedness for trade escalations compared to Trump’s first term and earlier pessimistic tariff expectations. The 10% US tariff hike is seen as a temporary disruption unlikely to derail the rally.
The NPC’s focus on technology innovation, consumption, and private sector support has bolstered market sentiment. China’s 5% growth target for 2025, combined with hints of looser monetary policies, such as potential cuts to borrowing costs and banks’ reserve requirement ratios. This has raised expectations of robust stimulus to counter deflation, property market challenges, and US trade tensions.
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Bloomberg consensus estimates for Wednesday’s Q4 labour market data are consistent with the RBNZ’s November projections with the unemployment rate forecast to rise 0.3pp to 5.1%, employment down 0.2% q/q and private wages up 0.6% q/q. ASB is generally in line with consensus but a bit lower for wages expecting a 0.5% q/q rise “given increased competition for jobs and less compensation for inflation”. It believes that the weaker labour market will result in further easing with 50bp in February and the OCR reaching 3.25% by mid-2025.
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- “Overall employment levels are expected to edge lower until a modest recovery takes place later in 2025.”
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- “Labour cost growth is also expected to slow as firms seek to contain the wage bill, with the balance of power still firmly in favour of employers. More moderate 2025 increases in the minimum wage (just +1.5% from April) and circa 2% inflation should see private sector labour cost growth fall below 3% by the end of 2025, consistent with core inflation settling within the 1-3% CPI target range.”
