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Markets across Asia edged up strongly yesterday in response to deal that averted the fiscal cliff, which wards off a likely recession in the world’s largest economy.
The best performer in Asia on the first trading day of the new year was the Hong Kong markert, which got an additional boost from positive Chinese manufacturing data, which boosted strong buying of high-beta shares.
The benchmark Hang Seng Index gained 2.89 per cent to finish at 23,311.98 points, breaching 23,000 for the first time since June 2011. Turnover stood at HK$82.4 billion, 32 per cent higher than a 30-day average.
“The deal has kicked [the year] off to a good start, with the US debt problems to be solved further down the road. That’s definitely a good short-term catalyst for the equity markets,” said Catherine Cheung Man Wah, head of investment strategy & research at Citibank’s Global Consumer Group. “You could see the risk appetite rise further after the deal and more high-beta stocks, especially in some cyclical sectors, will be in demand.”
Hong Kong market is trading at around 12 times to 12-month estimated earnings, still below its historical average of 14 to 15 times. On comparison, the US Standard & Poor's 500 index is trading at around 13.8 times to forward earnings.
Industrial goods, materials and financial firms were the top three performing sectors of the day. “New funds were flowing into those growth-sensitive sectors that have been underweighted, such as banks, insurers and some Chinese brokerages,” said Barring Asset fund manager Khiem Do.
Even after a strong rally since September, most material and industrial goods firms are still trading below its historical price-to-book value and provide a good buy for investors looking to adjust their portfolios at the beginning of the new year, according to Khiem Do.
Financial shares got further boost on Wednesday after the China Securities Regulatory Commission said it planned to allow asset management units and brokerages to set up mutual funds. Industrial & Commercial Bank of China added 3.64 per cent to finish at HK$5.7. Ping An jumped 5.16 per cent to close at HK$68.25.
Australia’s S&P/ASX 200 added 1.23 per cent to close at 4,705.94, while South Korea’s Kospi jumped 1.71 per cent to finish at 2,031.10. Meanwhile, benchmarks in Singapore, Taiwan, India, Philippines, Thailand and Indonesia also rose. Markets in Japan and mainland China were on holiday.