Stocks of local jewellers and department store operators rallied yesterday as investors scouted for market laggards in anticipation of greater consumer buying power on rising optimism that the mainland's economic recovery is firmly on track.
Jeweller Chow Sang Sang, which gained only 3 per cent compared with the Hang Seng's 23 per cent advance last year, yesterday shot up 12.81 per cent to finish at HK$21.05. Gome, the country's largest home appliance retailer whose market value was almost halved last year, climbed 10.42 per cent to finish at HK$1.06.
"As a China recovery play, investors have recently been chasing sectors that were underweight last year," Core Pacific-Yamaichi research head Castor Pang Wai-sun said.
As a result, underperforming segments such as consumer and energy stocks would continue to see strong interest, he said.
Local jewellers also got an extra boost yesterday from a Morgan Stanley report that said stronger sales growth this year could mean a re-rating for the industry.
"Pessimism is well priced in, and we think the time to invest is when sales growth bottoms out," Morgan Stanley analysts led by Edward Lui wrote in a research note.
Morgan Stanley expects jewellery and watch sales in Hong Kong to grow 15 per cent to 20 per cent this year.
Luk Fook, which lost up to 10 per cent last year, jumped 8.3 per cent to finish at HK$27.40 yesterday.
Chow Tai Fook gained 1.69 per cent to close at HK$13.22 while Hengdeli rose 4.6 per cent to HK$2.96.
Chow Sang Sang was the biggest gainer of its peers after Morgan Stanley singled it out, saying it is best placed for a rebound in top-tier cities and has strong operating leverage.
The stock is trading at about 12.2 times forward earnings, compared to 19 times for Chow Tai Fook and 12.3 times for Luk Fook. The Hang Seng Index is trading around 12 times forward earnings.
The mainland's non-manufacturing purchasing managers' index stood at 56.1 in December after recording 55.6 the previous month, the country's statistics bureau yesterday said.