- An index tracking the performance of Hainan-based companies rose 14 per cent this month through March 11 to a 10-month high
- China announced new measures for spur Hainan’s tourism industry suffering from coronavirus outbreak
Hainan-based companies are enjoying a bounce this month, pushing a stock indicator to a 10-month high, as investors bet the government will offer more support to help them overcome the crunch caused by the coronavirus outbreak.
The Hainan Composite Index, which tracks 26 local companies, has rallied 14 per cent this month through March 11 to a level not seen since April 30, according to Wind Information. The CSI 300 Index, which tracks China's biggest companies on the Shanghai and Shenzhen stock exchanges, rose 0.3 per cent in that time.
The Hainan government is leading a working committee with representatives from the civil aviation administrator and China Development Bank to help manage HNA Group, after years of debt-funded expansion led to a liquidity crunch, while the coronavirus outbreak slammed the airline business, one of the group's biggest assets.
HNA seeks help from Hainan government as coronavirus outbreak imperils debt workout efforts
The government's management of credit risks in HNA Group is one of the reasons for the rally, according to Wang Jianhui, general-manager of research department at Capital Securities based in Beijing. "The gain is also related to the improved coronavirus situation in the province."
Hainan leads the nation on the epidemic situation, with no reported infections since February 19, allowing companies to resume production faster than in other affected regions. Haikou-based Hainan Airlines said this week it will resume all flights into Hainan from Chinese cities from March 15.
Lanhai Medical Investment's share price has surged 73 per cent, Hainan Ruize New Building Material climbed 43 per cent and Hainan Strait Shipping advanced 24 per cent, making them among the biggest winners this month, according to Wind. Hainan Infrastructure and HNA Innovation added about 20 per cent.
The news got better on Wednesday after the National Development and Reform Commission (NDRC) -- China's top economic planning unit -- announced new measures aimed at reviving Hainan's tourism industry ravaged by the viral outbreak. China aims to set up a free-trade zone on Hainan Island by 2020 and a free-trade port by 2025.
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In the NDRC statement on Wednesday, the Hainan government said it will stimulate local and international travels to the island by holding various events. It will also help stabilise employment by returning partial unemployment insurance fees for the whole year of 2019 and provide companies with funds to support job training.
In addition, it will also provide loans with preferential interest rates and extensions of borrowings, allow firms to delay payment of utility bills for three months, as well as exempt property tax, land use duties, and rent for using state-owned real estate.
Twenty-three of the index-linked companies soared on the back of the news, with more than 10 surging by the daily maximum of 10 per cent including HNA Innovation, Lanhai Medical, China Hainan Rubber Industry and Hainan Shennong Technology.
"It's also due to less room for speculation in other segments in the stock market" such as technology companies which entered a technical downturn, Wang said. "Pushing stocks based on geographical concepts has become one of the choices for investors." These gains may not be sustainable as some companies lacked solid fundamentals to extract those opportunities, he added.
During the weekend, the province also tightened some controls on the property market, disallowing pre-sales of houses before construction is fully completed, the most stringent yet in the mainland housing market.
"The free-trade concept has emerged for some many years, for many years many opening policies have been given to Hainan, but it hasn't fully released the potential it should have with these policies," Wang noted, expecting restraint optimism from investors.
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