China Investment Corp forecast to zoom in on HK stocks

PUBLISHED : Tuesday, 02 October, 2007, 12:00am
UPDATED : Tuesday, 02 October, 2007, 12:00am

Hong Kong share prices could be bid higher this week on expectations that the mainland's US$200 billion sovereign fund will make the local market a 'top priority' when it starts building its foreign investment portfolio, said Michael Wong, a research director at Hantec Investment International.

'Excluding its investments in the domestic state-owned banks, China Investment Corp will have at least tens of billions of US dollars to invest in foreign financial markets,' Mr Wong said.

'Hong Kong stocks will definitely be one of its top priorities.'

Buoyed by positive sentiment arising from the formal launch on Saturday of the long-awaited fund, investors could chase up the Hang Seng Index beyond the 27,200-point level during the week, he said.

Further details relating to the mainland's qualified domestic institutional investor (QDII) programme, which Mr Wong said would be released 'very soon', would also help lift market sentiment.

Asian stock markets advanced yesterday, the first day of trading this month, with Japan's Nikkei-225 Index adding 0.36 per cent and Singapore's Straits Times Index surging 1.32 per cent to a record. Vietnam's Ho Chi Minh Stock Index was the region's top performer with a gain of 3.59 per cent.

Even before its formal launch, China Investment, previously known as the investment arm of the People's Bank of China, had already made a controversial entry into the financial markets.

In May, the unit bought a 10 per cent stake in US private equity firm Blackstone Group, a move that many viewed as the central bank acting on behalf of the state foreign exchange investment agency due to begin operations this year.

It was announced on Saturday that China Investment would have an initial investment war chest of US$200 billion allocated from the country's US$1.4 trillion of foreign reserves - the largest held by any country in the world.

Patrick Yiu Ho-yin, an associate director at CASH Asset Management, agreed that the formal launch of China Investment would help boost the Hong Kong stock market further.

'We do not yet know its investment strategy but generally the news is positive to the stock market,' Mr Yiu said, adding that the Hang Seng Index could trade between the 26,900 and 27,300-point levels during the week.

'We saw some profit-taking activity in the market last Friday, he said. 'Fortunately, the index rebounded quickly as investors believe there will be a continuous cash influx from the mainland due to the QDII policy.'

Shortly after the opening bell on Friday, the Hang Seng Index fell 166 points but rallied to end 77.32 points up at a new high of 27,142.47, lifting the market's capitalisation to exceed HK$20 trillion for the first time.

The Hong Kong stock market was closed yesterday for the National Day holiday.