HK index near two-year high on liquidity hopes
The Hang Seng Index approached a two-year high yesterday after unexpected monetary easing in Japan spurred speculation that other central banks will continue to support markets and keep liquidity taps open.
The benchmark climbed 1.07 cent, or 241.27 points, to 22,880.41 as trading turnover topped HK$100 billion. It is at the highest level in 10 1/2 months and sits less than 100 points below a two-year high.
'Forces [are] at work heading more cash into the markets,' said Howard Gorges, vice-chairman at South China Brokerage.
'And in the last two or three weeks the chorus has been broadening into [favouring] more equity investments particularly in strong emerging markets like China.'
The Bank of Japan lowered its benchmark interest rate on Tuesday to a range of 0 to 0.1 per cent from a target of 0.1 per cent. Investors were hopeful that the Bank of England may unveil some market-boosting measures when its policy meeting concludes today.
'Japan's decision could have set the ball rolling for a fresh round of quantitative easing from central banks,' wrote Mitul Kotecha, head of global foreign exchange strategy at Credit Agricole CIB.
The news pushed up markets around the region yesterday. Japan's Nikkei-225 Index jumped 1.8 per cent, Korea's Composite Index climbed 1.3 per cent and Taiwan's Weighted Index gained 1 per cent. Mainland markets were shut for public holiday and will reopen tomorrow.
Gorges also said some investors have been sitting on excess cash levels over the summer and may have started to re-enter the market as a potential late-year rally takes shape.
Main-board turnover has been on the rise recently, hitting the HK$90 billion mark three times since September 8. It topped HK$100 billion yesterday for just the fifth time in the past 16 months.
The increasing fund flows have sparked a rally in the Hang Seng Index and erased its 6.1 per cent slump through the first eight months of this year. Since the start of September, the benchmark has surged 11.4 per cent and increased in 20 out of 24 trading sessions.
A sentiment survey released this week by financial services firm Friends Provident International said 63 per cent of Hong Kong respondents thought the investment climate will improve over the next six months. That was up from 55 per cent in the June edition of the survey.
