Investors snap up battered blue chips as Greenspan, surveys expect a turnaround Regional markets surged higher yesterday in response to improving investor sentiment on Wall Street and hard evidence that the US economy was on track to recovery. Exporter stocks in Japan, South Korea and Taiwan led the charge as investors reacted to positive survey data from US firms and moderately positive comments earlier this week by US Federal Reserve chairman Alan Greenspan. News that the World Health Organisation had lifted its travel advisory for Hong Kong and Guangdong province came after trading hours, but a hardening belief that the Sars crisis had peaked and a return to normal commercial life was imminent saw investors pile back into battered blue chips. The Hang Seng Index rose 1.88 per cent to a three-month high of 9,303.73 points, on a turnover of $10.43 billion, the second highest this year. Relief was evident in the money markets, with the premium on one-month Hong Kong dollar currency forwards falling to 160-170 pips from 188-193 pips late on Thursday. However, a note of caution was struck by credit rating agency Fitch, which maintained a negative outlook on Hong Kong's foreign credit rating, saying the lifting of the travel ban would not spur any immediate recovery in business or tourist travel to Hong Kong. 'The US economic recovery is a combination of the tax cut, a weakening US dollar and good monetary policy,' said Tim Condon, the chief economist of ING Financial Markets. Analysts expect a strong market performance on Monday as fresh money enters the market and short covering by players who had bet on further falls causes a knee-jerk reaction higher. They say a sustained rally depends on a hardening economic recovery, stable property prices and a halt to the deterioration in bank-asset quality. Meanwhile, the Nikkei-225 Index rose 1.65 per cent, the Korea Composite Index climbed 2.7 per cent and the Taiwan Weighted Index put on 1.83 per cent, with exporter stocks with heavy exposure to the US consumer market dominating. In Hong Kong, battered property developer stocks such as Sun Hung Kai Properties rose 3.55 per cent to $37.90, Henderson Land jumped 5.34 per cent to $20.70 and Swire Pacific climbed 3.41 per cent to $33.30. Hutchison Whampoa rose 3.28 per cent to $47.20 on Thursday's news that it had disposed of stocks in European telecommunications firms at better than expected prices. Steven Leung Wai-yuen, a director of UOB-Kay Hian Hong Kong, said: 'The hot money is flushing into the market. After a two-week consolidation, investors are more comfortable with equities and are helped by a more optimistic US outlook.' Analysts cautioned that the Sars situation must remain stable and corporate profit prospects would have to improve for the rally to be sustained. ING head of Hong Kong and China research Kingston Lee King-yue said: 'The market may only stay strong in the short term, pending upgrades in the earnings of major corporates.' Underlying investors' beliefs that the US economy has turned the corner is survey data from bodies such as the National Association for Business Economics, which forecast growth of 3.6 per cent in the second half of this year and all of next year. Earlier this week, Mr Greenspan said a recovery in financial markets and gains in productivity 'augur well for the future'.
