HSBC surges 6 per cent, lifting Hang Seng Index in broad blue chip rally

Sino-British banking giant HSBC Holdings surged 6.3 per cent on Thursday, propelling Hong Kong stocks higher, after Morgan Stanley increased significantly the target price for the stock.

Market sentiment also received a general boost as Chinese President Xi Jinping started a three-day visit to the city ahead of Hong Kong’s handover anniversary.

The Hang Seng Index climbed 1.1 per cent, or 281.92 points, to 25,965.42 at the close. The Hang Seng China Enterprises Index, which tracks the performance of selected mainland companies listed in Hong Kong, added 0.2 per cent to 10,432.02.

“Hong Kong stocks’ uptrend remains intact,” said Dai Ming, a fund manager at Hengsheng Asset Management. “Factors supporting the rally, such as cheap valuations and the yuan’s weakness, are still there.”

Hong Kong stocks are among the best-performing markets in Asia this year, with the Hang Seng Index rising 18 per cent, as mainland investors buy assets denominated in the city’s currency that is pegged to the US dollar as a hedge against the yuan’s depreciation. The city’s equities are now still 21 per cent cheaper than mainland shares, according to an index tracking the price difference of the two markets.

The Hang Seng Index may rise to as high as 29,000 in the fourth quarter before falling back to around the current level towards the end of the year because of higher borrowing costs and weak earnings growth, according to China Construction Bank. The lender’s year-high target of 29,000 represents an 11 per cent rise from Thursday’s close.

Nearly all the blue-chip stocks rose on Thursday.