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Hong Kong Monetary Authority (HKMA)

Hot money pushes up Hong Kong stocks to 15-month high

PUBLISHED : Saturday, 03 November, 2012, 12:00am
UPDATED : Saturday, 03 November, 2012, 3:32am

Hong Kong stocks hit a 15-month high yesterday, breaching the 22,000 level for the first time in 15 months as investors were cheered by positive data from the US and the mainland.

The Hong Kong Monetary Authority (HKMA), the city's de facto central bank, stepped into the money market for the 10th time over the past two weeks as hot money continued to flow into the city. The HKMA sold a total of HK$5.04 billion in Hong Kong dollars yesterday in the latest move to stabilise the currency.

The benchmark Hang Seng Index closed 289.46 points, or 1.33 per cent, higher at 22,111.33, the highest figure since August 2 last year.

The Hang Seng China Enterprises Index (HSCEI), which tracks the performance of Hong Kong-listed mainland firms, added 132.52 points, or 1.24 per cent, to finish at 10,833.73. The mainland's official Purchasing Managers Index on Thursday showed factories were back in expansionary mode for the first time since May this year.

"People were not as bearish as they were in the middle of the year because China is stabilising. The worst is over," said Vincent Chan, Credit Suisse's China equity strategist. He said the HSCEI had the potential to test 12,000 in the months ahead, with mainland firms to outperform the benchmark HSI on valuation.

Investors were also upbeat about fresh US economic data. The Labour Department said 171,000 new jobs were added last month - well above expectations. And US consumer confidence jumped to its highest level in more than four years, the Conference Board said.

Daily turnover yesterday of HK$70.12 billion was the highest since October 18, compared with a year-to-date average of around HK$53 billion, a sign that abundant liquidity buoyed by consistent hot money inflows are building positions in equities.

Yet Chan is conservative about the impact of hot money inflows on equity prices in Hong Kong. He said: "Although the situation is improving, foreign investors are no longer as bullish on China as they were when QE 2 was launched in 2009. Some were still quite conservative on the China story due to shadow banking, unclear political signals and social stability issues."

Macau casino operators made gains after the city's gambling revenue hit a record high last month. Sands China gained 6.33 per cent to finish at HK$31.9 and SJM Holdings added 6.11 per cent to HK$18.06.

Meanwhile, retail stocks gained momentum after the city's September retail sales posted better-than-expected 9.4 per cent growth to HK$34.1 billion. Jeweller Chow Tai Fook surged as much as 9.6 per cent to finish at HK$10.58, while Hengdeli Holdings jumped 9.6 per cent to close at HK$2.86.

Morgan Stanley analyst Denise Yam wrote in a note: "We expect retail sales growth to remain largely stable for the remainder of this year, averaging slightly less than 10 per cent for the full year."