• Hang Seng Index also turns positive after starting day lower
  • Goldman says investors want a ‘comprehensive easing package’

Chinese equities listed in Hong Kong gained as trading resumed after the Lunar New Year holiday, with positive consumption data aiding sentiment.

The Hang Seng China Enterprises Index, which tracks Chinese stocks traded in Hong Kong, recouped early losses to close 1.5% higher and break a three-session losing streak. Tech stocks led the advance, with Meituan the biggest contributor after local media reported the delivery platform saw a jump in meal orders by travelers from a year ago in the first few days of the festival.

Other data that emerged during the holiday also helped. Citigroup Inc. said Macau casinos saw a strong start to the holidays, with mainland visitors rising 34% in the first three days versus the comparable period in 2019. Galaxy Entertainment Group Ltd. rose 3.5%.

“The rebound in Hong Kong may be driven by initial Lunar New Year spending data” including order growth for Meituan and positive Macau travel data, said Marvin Chen, strategist at Bloomberg Intelligence.

Still, structural issues such as deflationary pressures, the property market crisis, and tensions with the West continue to weigh on investors. Investors are still trying to assess Chinese authorities’ willingness to halt the deepening rout, and evaluating a drop in the US stock market overnight after a stickier-than-expected inflation reading.

“In the longer term, we still need a more comprehensive easing package to address the macro problems,” Si Fu, a China portfolio strategist at Goldman Sachs Group Inc., said in a Bloomberg Television interview. Investors want “a long term plan to address property and local government debt issues,” and direct stimulus to boost consumption, she added.

The latest Asia fund manager survey from Bank of America showed China allocations dropped to a new low, with investors buying into the idea that the propensity among Chinese households to preserve cash rather than spend or invest is here to stay.

Earlier this week, MSCI Inc. said it’s deleting a slew of battered Chinese stocks from its indexes, while Hong Kong’s top housing estates saw zero deals during the Lunar New Year holiday for the first time since records began in 2010. The European Union has proposed new trade restrictions on about two dozen firms accused of supporting Russia’s war efforts in Ukraine, three of which are based in China.

Traders will be watching for further policy signals from Beijing, including a potential reduction in interest rates in announcements scheduled this month and a possible increase in government spending in the National People’s Congress’s annual sessions in early March.

“We may get an interest rate cut, but the focus will largely be on the fiscal support and potential budget expansion to be announced at the Two sessions policy meeting in early March,” said Chen.

Written by:  and  — With assistance from David Ingles and Ishika Mookerjee @Bloomberg

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