Hong Kong Stocks Rebound on Gaming Sector Reassurance and Beijing's Approval of New Titles

Hong Kong stocks staged a notable recovery as video-gaming companies saw a rebound after Beijing offered reassurances regarding industry regulations and approved a substantial number of new game titles. The Hang Seng Index surged by 1.5% to reach 16,590.23 during the local noon trading break, while the Tech Index recorded a robust 2.3% advance. This marked a significant recovery from the sell-off observed on the previous Friday. The two major indices, along with other key stocks, experienced positive momentum driven by Beijing's approval of 105 new game titles, the most significant approval in 17 months.

Notably, Tencent and NetEase, which faced substantial losses during a US$63 billion sell-off on Friday due to proposed curbs on excessive game spending, rebounded strongly. Tencent surged by 5.9% to HK$290.20, and NetEase soared by 10.3% to HK$134.60. These gains were fueled by Beijing's clarification that the proposed spending curbs are not yet finalized.

Other major players in the Chinese market also witnessed positive movements. Alibaba Group recorded a 2.7% rise, reaching HK$73.80, while Meituan gained 1.8% to HK$78. Electric vehicle maker BYD saw a 1.5% increase, closing at HK$205.60, and Li Auto strengthened by 4.8% to HK$134.30.

Market analysts at Jefferies expressed optimism, stating, "We believe market concerns over a sector crackdown are overdone." They emphasized that the draft rules aim to foster a healthy gaming sector, and the market needs to monitor the eventual outcome.

In addition to the gaming sector rebound, better-than-expected industrial profits in China contributed to the positive sentiment. Profits for China's industrial companies rose by 29.5% year-on-year in November, accelerating from a 2.7% pace in October.

Despite the recent gains, the Hang Seng Index has faced challenges, declining by 4% in December. This marks the fifth consecutive monthly setback and the longest losing streak since 2018. The benchmark has lost 17.4% throughout the year, potentially heading for an unprecedented four-year slump.

While certain stocks have experienced gains, such as Li Auto, Lenovo, and Xiaomi with increases ranging from 49% to 75%, others like Li Ning, Meituan, and Country Garden Services faced declines between 55% and 71%.

In the broader market, the CSI 300 in the onshore market has also faced challenges, declining nearly 14% throughout the year. Notably, the best and worst months for the CSI 300 tracked the performance of the Hang Seng Index.

As the year concludes, the Asian markets remain dynamic, with mixed performances observed across different regions. Japan's Nikkei 225 recorded a 1.1% rise, the S&P/ASX 200 Index gained 1% in Australia, while South Korea's Kospi Index saw a minor decline of 0.1%.

The market landscape remains subject to ongoing developments in the gaming sector, regulatory policies, and broader economic trends, shaping the outlook for Hong Kong and Chinese stocks as they navigate the complexities of the financial landscape.

By fLEXI tEAM