Market Wrap: US easing speculation boosts Hang Seng to 16-month high

Hang Seng rose to the highest level since August last month on Wednesday, on speculation the US would announcing more monetary easing measures in a bid to revive the economy.

The Federal Open Market Committee (FOMC) is due to release their key interest rate decision at 1.30am (HK time) on Thursday. 

Traders are expecting more easing to come and more inflows would be flocking to Asia after the Fiscal Cliff issue is solved by the first quarter next year.

The benchmark Hang Seng Index gained 179.41 points, or 0.80 per cent, to finish at 22,503.35. Turnover stood at HK$64.02 billion.

Economists said the US economy had failed to experience a meaningful turnaround after the previous round of quantitative easing in September, which is open-ended with a monthly purchase of US$40 billion in mortgage bonds.

Economic data have given a mixed message on the world’s biggest economy, and central bankers want to do more to boost the economy despite the inflationary risk, the economist said.

The US might convert the US$45 billion per month “operation twist”, which is buying long-end and selling short-end securities, into overt quantitative easing, which is only buying longer-dated securities, they said.

The likely boost in easing could turn the current US$40-billion QE plan into a US$85-billion monthly programme, according to Nomura Global Head of Equity Strategy Michael Kurtz.

Asian inflows had been “on hold due to uncertainties over US and Chinese political transitions last month and still on hold due to the US fiscal cliff", he said.

“But once the (problem of the fiscal) cliff is resolved, we expect the traditional pattern of Asian inflows to resume in strength,” he said.

Hong Kong property index was the biggest gainer among sectors covered by Hang Seng, adding 1.19 per cent, as investors believe the hot money coming into Hong Kong would boost property prices. Cheung Kong (0001.HK) added 1.75 per cent to finish at HK$121.80.

As for individual stocks, Guoco Group (0053.HK), which is controlled by Malaysia tycoon Quek Leng Chan and is the second biggest shareholder of Bank of East Asia, surged 30.6 per cent to finish at HK$92.05.

The billionare is offering US$1.1 billion to take Guoco private, offering to buy the company at HK$88 per share.