Hong Kong’s stocks rose, with the benchmark gauge rebounding from a four-month low, on expectations that the recent losses were excessive relative to valuations.

The Hang Seng Index gained 0.5 per cent, or 120.89 points, to 23,431.96 at the open on Friday, after falling to its lowest close since May 29 a day earlier. Still, the 50-member benchmark is heading for a 4.2 per cent decline this week, the worst performance for the five-day period since March.

The mainland’s Shanghai Composite Index added 0.2 per cent on Friday.

The 14-day relative strength index of the Hang Seng gauge fell to 27 on Thursday, below the threshold of 30 that signals to some technical traders that stocks are oversold and due for a rebound. The Hang Seng Index is valued at 12.4 times earnings, the lowest multiple among the world’s major markets, according to Bloomberg data.

Temporary stabilisation of global markets on the back of the recent sell-offs also helped lift sentiment. Major equities gauges of US stocks all ended higher in overnight trading, although they gave up most of the gains in a volatile session.

The White House is still in a deadlock with Congress over a new fiscal stimulus package, and Europe has been roiled by a resurgence of Covid-19, with the UK and France reporting record-high daily new infections since the outbreak started.

“At this point in the recovery, a return to the Covid-19 abyss due to stricter lockdown measures is quiet frankly something the global economy cannot afford,” said Stephen Innes, chief global market strategist at AxiCorp.

China Evergrande Group, the world’s most indebted property developer, slid 1.8 per cent to HK$14.94, extending a 5.6 per cent loss a day earlier, on concern that it will not be able to repay a debt of 130 billion yuan (US$19.1 billion) maturing in January.

Four companies – Shanghai Zhonggu Logistics, Guangzhou Ruoyuchen Tech, Elite Color Environmental Resources and Shaanxi Zhongtian Rocket Technology – made their trading debuts on the mainland’s exchanges, while Ming Yuan Cloud Group Holdings traded for the first time in Hong Kong.