Anticipation of bigger US Fed bond buys drives Hong Kong stocks up
Hong Kong stocks rose to a 16-month high on speculation the US central bank may decide to more than double the size of its monthly bond purchases, which could draw more hot money into the city's equity market.
The Hang Seng Index added 179.41 points, or 0.8 per cent, to finish at 22,503.35 yesterday, the highest since August last year.
Traders were expecting the Federal Open Market Committee to ramp up its monetary easing programme by purchasing US$45 billion worth of treasuries each month, raising the already under way US$40 billion of quantitative easing per month to US$85 billon.
This would replace the "Operation Twist" programme that expires this month, which buys long-term treasuries and sells short-term ones. Federal Reserve chairman Ben Bernanke "presumably sees it as a useful insurance policy against a possible cliff-related economic stumble in the near-term", said Michael Kurtz, Nomura's global head of equity strategy.
Capital inflow to the Asian markets has already been turning up again in recent weeks, even without a deal to avoid the fiscal cliff. The Hang Seng Index has gained 16 per cent since August 31 when Bernanke hinted the QE3 was coming.
The Hong Kong Monetary Authority sold HK$4.65 billion worth of Hong Kong dollars in the money market yesterday as the currency hit the strong end of its trading range against the greenback. Before yesterday's injection, HKMA had sold US$9.25 billion worth of Hong Kong dollars since October 20.
Property developers gained most among sectors under the benchmark yesterday on speculation that continued inflows could boost asset prices. Cheung Kong added 1.75 per cent to finish at HK$121.8.
PetroChina rose 1.12 per cent to HK$10.8 after it said it would buy a stake in an Australian liquified natural gas from BHP Billiton. Guoco surged 31 per cent following a privatisation plan.