Hong Kong stocks jump on tech rally; China shares edge up

Hong Kong's stock market experienced a significant rally on Thursday, while China's shares managed to edge higher as market sentiment improved following the US midterm elections. Analysts noted that tech and gold stocks were the major drivers of the positive movement, whereas energy stocks struggled during the trading session.

The CSI300 Index in China rose by 0.4% during the lunch break, and the Shanghai Composite Index climbed by a modest 0.1%. Hong Kong's main benchmark, the Hang Seng, gained 3% for the day. The market's upward trend appears to be in line with Wall Street's overnight rally, as investors welcomed the news of lower uncertainty.

The Hang Seng Tech sector witnessed a sharp 5% surge, with major players Alibaba and Tencent leading the charge, each gaining more than 7% and 5% respectively. In mainland China, investors displayed a preference for gold miners, solar power, semiconductors, and new energy companies. However, there was a notable decline in oil and optical communication shares.

Morningstar analysts expressed their positive outlook on China and Hong Kong markets, stating that they remain relatively attractive following a correction in October. The research firm highlighted Alibaba and Tencent as particularly promising, as they anticipate AI adoption to translate into revenue growth for these companies.

Cliff Zhao, Chief Economist at CCB International, expects the US-China competition in advanced technology to continue after Democrats secured a significant victory in the midterm elections. Zhao suggests that there may be an increase in congressional oversight of Commerce Department export licenses and the implementation of restrictive legislation.

He anticipates that China's domestic technology supply chain could become further differentiated, impacting hardware exporters that heavily depend on US AI capex. However, he believes that GPUs, semiconductor equipment, advanced packaging, and computing infrastructure will continue to benefit from the growing need for technological self-reliance.

Zhiwei Zhang, Chief Economist at Pinpoint Asset Management, anticipates increased uncertainty in US-China relations in the coming year. Democratic Party's midterm win has raised hopes for an end to the US-Iran war. The state-owned oil producer, PetroChina, saw a 7% drop by midday, following a nearly 9% decline in Brent crude futures overnight.

The decline in oil prices can be attributed to Democrats' victory, which indicates a potential end to the US-Iran conflict. Meanwhile, the Shenzhen index increased by 1.69%, while the ChiNext Composite index gained 1.24%. Shanghai's tech-focused STAR50 index also gained 2.11%.