The Hong Kong market leapt 4.89 per cent yesterday, closing the gap with rallies elsewhere in the region as international investors wager on a turnaround in Asia. The Hang Seng Index rose 541.89 points to close at 11,614.87, its highest finish in just more than a year, after trading resumed for the first time since last Thursday. Developers and banks - Cheung Kong and HSBC - traded at pre-crisis prices, while utilities and red chips saw smaller advances. Brokers said Hong Kong and other regional markets could hope to rally further, led by Wall Street, on signs of an Asian turnaround and an increase in overseas liquidity. That liquidity could be seen in the stock markets, the eager take-up of recent bond and equity issues, and in direct investments such as British Telecommunications' 20 per cent stake in SmarTone Telecommunications this week, analysts said. 'None of the [Hong Kong] market numbers look cheap, but you've got to look at this on a global basis. There is an awful lot of money swilling around the world at the moment,' Paribas research head Simon Irwin said. Even after yesterday's performance Hong Kong has not caught up with markets in Singapore and South Korea, which have gained 4.99 per cent and 5.72 per cent respectively since last Thursday. 'Over the last month or so the mood in Asia has improved rapidly. We do appear to be coming out of the problems rather faster than anyone expected,' Mr Irwin said. Hong Kong stocks are now trading at 15.5 times earnings for this year, by Paribas estimates, historically expensive. Salomon Smith Barney-Citibank Asset Management director Giampaolo Guarnieri said: 'It will be difficult to break this market on the downside. 'That applies to HSBC and the rest of it - some segments are looking increasingly expensive in light of fundamentals that are not great . . . but then who cares about fundamentals?' HSBC rose 6.04 per cent to $263 yesterday. One more $15 leap and it will be a breath away from its record high of $279, reached in July 1997, at the peak of the bull run. ICEA Securities banking analyst Warren Blight said: 'It's moving up in line with overseas markets, and I think it's not excessive - though the outlook is probably neutral from here.' The property stock sub-index jumped 5.41 per cent, with market giant Cheung Kong gaining 5.83 per cent to $63.50 - a level not seen since October 1997. Sun Hung Kai Properties rose 5.95 per cent to $62.25 and New World Development added 5.37 per cent to $16.65 after the firms announced they would invest $2.8 billion to develop a residential project in Sai Kung. Brokers said investors were factoring into the share prices an expected rise in property prices. BNP Prime Peregrine research head Adrian Ngan Wai-hung said: 'The [share] prices look a bit high but it is justified in the short term because people are expecting property prices to go up over the next few months.' Some said property and bank shares were also following the blue chips gaining from international exposure, namely HSBC and Cheung Kong. For instance, Cheung Kong's valuation is enhanced by its 49 per cent stake in Hutchison Whampoa, whose assets stretch from cellular telephone operations in Britain to ports in South America. DBS Securities research director Frederick Tsang said: 'A lot of property companies are compared to Cheung Kong so they also increase in value.' The BT-SmarTone deal also helped sentiment yesterday, not to mention SmarTone, whose share price closed 3.77 per cent higher at $23.35. Brokers said the purchase set a precedent for further merger and acquisition activity with foreign companies eyeing the mainland market. J&A Securities sales head Eric Lee Ming-chuan said: 'It's a small transaction in the context of the stock market, but it points towards further transactions in terms of M&A activity.' Further deals were expected in the telecommunications sector. Mr Ngan said: 'This will not be the last one.' Leading red chips, such as Shanghai Industrial, and H shares rose on the prospects Premier Zhu Rongji would bring a World Trade Organisation deal home from his trip to the United States. Mr Lee said: 'The market feels that if it does not happen in April, it will happen in September. The market is willing to take a chance.' Mr Guarnieri said few international investors had been willing to take a chance on China shares, however, putting them in a vulnerable position if a surprise deal came through. 'Global investors have virtually next to nothing in China. WTO could be on the cards, clearly it's a risk for investors who have no exposure to China shares,' he said. Mr Lee said: 'All sorts of M&A activity could be done through H shares, with foreign companies using their distribution channels or upgrading their facilities.'
