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Nikkei Markets

China stimulus hopes lift Hong Kong shares

Chow Tai Fook slides after October-December same-store sales decline

HONG KONG (Nikkei Markets) -- Hong Kong shares resumed gains on Tuesday, as Chinese companies rallied after Beijing indicated its plans for more growth-supportive policies.

The Hang Seng Index added 1.7% to 26,746.57 by noon after it halted a six-day rally on Monday, dropping 1.4%. Internet heavyweight Tencent Holdings rose 2.1%, while pan-Asia insurer AIA Group advanced 2.8%. The two stocks contributed most to the gauge's gains by points. China Life Insurance added 3.6% after reporting a 4.7% increase in accumulated premium income for 2018.

The Hang Seng China Enterprises Index of large mainland companies listed in Hong Kong climbed 1.8%, while the Shanghai Composite Index added 1%. Officials from the People's Bank of China, the National Development & Reform Commission and China's Ministry of Finance on Tuesday indicated that Beijing would lend further support to boost Asia's largest economy.

The central bank plans to keep a "reasonable balance" in its monetary policy, PBOC Vice Governor Zhu Hexin said, adding that the authority aims to keep liquidity "reasonably ample" and maintain "reasonable growth" in monetary credit and social financing. Meanwhile, NDRC Vice Chairman Lian Weiliang said the government will implement large-scale tax and fee reductions. The news conference in Beijing came a day after data showed an unexpected dip in China's trade numbers for December.

"Market participants are envisioning further monetary easing and fiscal stimulus measures" after Monday's weak data, said Daniel So, strategist at CMB International Securities. "It is very likely that market participants are believing their words and expect more liquidity easing measures, including open-market operations."

There is also the "psychological effect" of the cut in mainland Chinese banks' reserve requirement ratio taking effect, So added. The first stage of the PBOC's 100-basis-point RRR cut, announced earlier this month, took effect Tuesday. The second stage will take effect Jan. 25.

The yuan traded onshore climbed 0.2% to 6.7505 against the U.S. dollar.

Chow Tai Fook Jewellery Group fell 1.6% in Hong Kong. The jeweler on Monday said its same-store sales for the December quarter fell 7% in China and 6% in Hong Kong and Macau. It reported a 1% increase in retail sales value growth for mainland China during the period, but said retail sales value declined 1% in Hong Kong and Macau.

Prudential, which has a 50-50 insurance joint venture in China with mainland conglomerate CITIC, has "no immediate plans" to change that structure, although the British insurer welcomes the easing of foreign ownership rules by Beijing, said Nic Nicandrou, chief executive of Prudential's Asian operations. Prudential and CITIC will continue to focus on expanding their capabilities in China, he added. CITIC, which holds a 50% stake in the venture through a subsidiary, rose 1%.

China Southern Airlines edged 0.6% higher after reporting a 6.9% increase in passengers carried during December.

New China Life Insurance added 2.2% following a 12% increase in accumulated gross premium income for 2018.

Food-and-beverage services provider Tsit Wing International Holdings jumped 16.8% after forecasting an up to 60% increase in net profit for the year ended Dec. 31, 2018.

Shandong Xinhua Pharmaceutical rose 2% after reporting a 20% increase in 2018 net profit.

-- Amy Lam

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