China stocks end higher on Guangzhou Covid easing, auto gains

BEIJING: China and Hong Kong shares extended gains on Wednesday as market participants cheered an easing of COVID-19 measures in Guangzhou city and auto stocks surged on potential favourable policies.

Southern Guangzhou city relaxed COVID prevention rules in multiple districts including Fanyu, Tianhe, Conghua, Huadu and Liwan, boosting investor sentiment dampened by worse-than-expected China factory and service activity data.

China's blue-chip CSI 300 Index rose 0.12%, while the Shanghai Composite Index was up 0.05%. Hong Kong's Hang Seng Index gained 2.16%, while the Hang Seng China Enterprises Index advanced 2.21%, reversing early losses.

China's factory activity contracted at a faster pace this month, an official survey showed, weighed down by COVID curbs and softening global demand. The official manufacturing purchasing managers' index (PMI) stood at 48.0 against 49.2 in October, the lowest reading in seven months.

"Economic activities will likely weaken further in December and the first quarter," said Zhiwei Zhang, president and chief economist at Pinpoint Asset Management. "Nonetheless, the market sentiment is improving as investors look through the weak economic data in the short term. The key question on investors' minds is how long this reopening process will take."

Auto stocks led the gains on strong October sales figures despite the COVID impact. Reports of an industry move to suggest the government extend its purchase-tax waiver for ICE vehicles also lifted sentiment. Electric vehicle maker BYD said it would launch its cars in Mexico next year, aiming for up to 30,000 sales in 2024. Its shares jumped 4.5%.

The CSI all share automobiles index surged 6.1% and new energy vehicles were up 1.8%. In Hong Kong, Geely Auto soared 10.9%. Hong Kong-listed mainland property developers dipped 0.9% after an 8% jump on Tuesday.

China has enlisted tech giants Alibaba and Tencent to aid its efforts in designing semiconductor chips, the Financial Times newspaper reported. The Hang Seng Tech index picked up 2.8% at close.

HSBC Holdings' Hong Kong-listed shares climbed 2.2% as the bank agreed to sell its business in Canada to Royal Bank of Canada for C$13.5 billion ($10 billion) in cash, paving the way for a potential bumper payout for shareholders later down the line.