China stocks rebound after sell-off; Hong Kong extends gains on Fed rate outlook

SHANGHAI: China stocks rebounded on Friday after a sharp selloff in chipmakers in the previous session, while Hong Kong shares extended gains as a tepid US jobs report reinforced bets that the Federal Reserve would keep monetary policy supportive.

At the close, the Shanghai Composite index inched up 0.4percent, while the blue-chip CSI300 index gained 0.6percent. For the week, the SSEC rose 0.4percent, but the CSI300 lost 0.5percent.

Robotics shares led gains, with a sector sub-index jumping 6.2percent after China’s securities regulator approved Unitree’s Shanghai IPO late on Thursday. In Hong Kong, the Hang Seng Index advanced 1.3percent, while the city’s tech shares closed up 1percent. US job growth slowed sharply in June, signalling a cooling labour market and prompting investors to scale back expectations for higher US interest rates.

“We believe the incrementally bigger representation of the tech- and innovation-heavy sectors in the A-share market will continue, with clear policy, funding, resources and capital market action support,” analysts at Morgan Stanley said in a note. “As a result, we see the best opportunities at the index level as offered by the A-share market.”

Investors are closely watching June economic data due in the coming weeks for fresh clues on the strength of China’s economic recovery. “We are keen to see the final Q2 activity data for June, due in mid-July, for further signs that the economy is emerging from its soft patch in April and May,” said Kelvin Lam, senior China+ economist at Pantheon Macroeconomics.

“Even if activity remains sluggish, policymakers are likely to stick to only modest policy adjustments in the second half at the July Politburo meeting, rather than unveil a bazooka stimulus.”