Hong Kong stocks boosted by Alibaba; China rescue report scepticism lingers

(Updated at 0400 GMT)

By Summer Zhen

HONG KONG, Jan 24 (Reuters) – Hong Kong stocks rose on Wednesday as hopes of Chinese authorities coming to the rescue of a battered market and news of Jack Ma scooping up Alibaba Group shares lifted market sentiment.

The Hang Seng Index (HSI) jumped 2.4% and the Hang Seng Tech Index was up as much as 3.7% in early trade, driven by the gains in benchmark heavyweight Alibaba, before ceding some ground. By midday, the HSI was up only 0.8%.

The market mood remained fragile, reflected in China A-shares, with the blue-chip CSI 300 Index edging down 0.45% and hovering near a five-year low it struck last week. The Shanghai Composite <.SSEC dipped> 0.15%. Both had eked out modest gains in the previous session.

Tuesday’s light rebound was spurred by a news report and a pledge by China’s cabinet flagging support for equity markets.

Both the HSI and the Hang Seng Tech Index had plunged on Monday to 15-month lows in a broad selloff of Chinese stocks driven by worries over the economy and concerns 2024 will not bring a turnaround.

Hong Kong shares of Alibaba surged over 6% in early trade to their highest since Jan. 5, after the New York Times reported co-founder Jack Ma and Chairman Joe Tsai bought shares worth millions of dollars in the Chinese e-commerce giant in the fourth quarter. The company’s U.S.-listed shares rebounded nearly 8% on Tuesday.

China’s cabinet said on Monday it would take forceful and effective measures to stabilise market confidence.

Bloomberg News, citing unidentified sources, said on Tuesday policymakers were seeking to mobilise about 2 trillion yuan ($279 billion), mostly from offshore accounts of state enterprises, to fund equity buying through a stock connect link.

Kamil Dimmich, partner and portfolio manager at North of South Capital EM fund, based in London, said he was not sure such a package would help.

“That’s not a solution to anything. I think if it was combined with some structural reforms or something that people were really looking out for you could turn the tide,” he said.

“On its own, you’ll get a spike, you’ll get some sort of day one reaction, but it’s not a long-term solution.”

Local analysts have been have been calling for the set up of a rescue fund since last year.

The potential rescue fund, if true, is a boost to sentiment and liquidity but unlikely to solve core issues, including problems in the economy and corporate earnings, Morgan Stanley analysts led by Laura Wang said in a note.

“We think coordinated macro stimulus actions are necessary for a sustainable recovery,” they said. (Reporting by Summer Zhen; Additional reporting by Laura Matthews in New York, Ankur Banerjee in Singapore; Editing by Vidya Ranganathan and Jamie Freed)

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