Stimulus hopes drive market rebound
The Hong Kong stock market put in its best performance in nearly three months yesterday, on investor expectations that China, the US and Europe will stimulate their flagging economies.
The benchmark Hang Seng Index rose 73.83 points, or 0.37 per cent, to 20,072.55, the highest level since May 10. Analysts are divided on how the market will perform in the coming weeks.
Patrick Pun, director of global investment strategy at Haitong International Securities, forecast the index will climb to 25,000 points over the coming week.
'Technical factors are driving it. Many Hong Kong stocks will be announcing their results. It will not be worse than expected,' said Pun.
But Kenny Tang Sing-hing, general manager of AMTD Financial Planning, said the Hang Seng Index may rise to 21,000 in the next two weeks. 'The fundamentals of the stock market and global economy are not very strong,' plus he expected results from Hong Kong and mainland companies to be mixed.
Yesterday's stronger market was partly due to investor hopes that the central banks of Europe and the US would introduce more measures to boost their economies, Tang said.
On July 26, European Central Bank chief Mario Draghi pledged full support for the euro.
The market is also hoping the US Federal Reserve will introduce a third round of quantitative easing around September, said Tang. 'The market expects [US President Barack] Obama to do something about the economy due to the [US presidential] elections' set for November.
Tang added that yesterday's rally was a reflection of last week's rebound on the Shanghai and Shenzhen stock markets on speculation that Beijing might pump in 100 billion yuan (HK$122.58 billion) to support the mainland stock markets.
Another equity analyst added that local sentiment had been buoyed by positive data from the United States, including 163,000 new jobs added in July - the biggest net gain in employment since February.
'Some US corporates have given good figures' during the current reporting season, he added.
Also supporting the local market was President Hu Jintao's call on July 31 to give more priority to boosting China's flagging economic growth, said the analyst.
He noted that investors were buying back shares to cover heavy short selling of Hong Kong stocks, propping up the market.
The Hang Seng Index rose by this much yesterday. It closed at 20,072.55 points - its highest level in nearly three months