Hang Seng Index reaches 44-month high, helped by falling oil prices and strong US retail sales data Investors continued to pour money into the Hong Kong market yesterday, pushing the blue-chip index to a 44-month high amid heavy trading activity. Optimism was underpinned by strong overseas markets, a continued decline in oil prices, ongoing speculation about a revaluation of the yuan and the surprise cut in Hong Kong interest rates last week. Higher than expected United States retail sales data and consumer confidence numbers released last Friday also helped support stock markets across the region as they suggested economic growth in the US market - a key importer of Asian-made goods - remained on track. The Hang Seng Index added 147.76 points to close at 13,932.22 after hitting an intraday high just above 13,950. The closing level was the highest since the index finished at 14,194.35 on March 9, 2001, but is 108 points short of this year's intraday high reached on March 1. 'I think the index will easily push through 14,000 as there are still a lot of laggard stocks that will trace this price gain and there is a lot of 'hot' money coming in from Europe, the US, Japan as well as from local funds,' said William Li, chief operating officer at Tai Fook Securities. Trading volumes stopped at $22.81 billion yesterday, just shy of Friday's $23.05 billion, but well above the three-month daily average of $14.99 billion. Some market watchers however cited caution, noting from a technical point of view, that the Hang Seng Index appears overbought. The clearest sign of this, they argued, is that the nine-day relative strength index (RSI) is trading close to 80, while a reading above 70 normally suggests a pull-back is near. 'I have a year-end target of about 14,100 to 14,200 and we are not too far away from there so I'm getting ready to take profit on the stocks that have outperformed,' said John Koh, a fund manager with Daiwa Asset Management. The RSI reading 'makes me slightly suspicious', agreed Miles Remington, head of sales trading at BNP Paribas Peregrine, noting that the question was how long the upbeat sentiment could prevail if US markets had a bad day. 'But there are no signs of profit taking yet and people are still putting money to work chasing laggards,' he said, noting that any decline was likely to be viewed as a buying opportunity. A lot of the money continued to go into HSBC yesterday, which recorded a new closing high of $136.50 after gaining $2, or 1.49 per cent. Traders said reports that the bank was poised to buy Newbridge Capital's 49 per cent stake in Korea First Bank for up to US$3 billion was taken positively by the market. Meanwhile, last week's decision by some local banks, including HSBC, to cut both lending and savings rates, even as US interest rates were raised for a fourth time this year, had given additional support to both banks and property stocks, they said. Bank of East Asia gained 1.47 per cent to $24.10 and BOC Hong Kong, which yesterday changed its original plan to leave rates steady and followed the cut made by its rivals, added 1.38 per cent to $14.70. Standard Chartered finished 0.34 per cent higher at $147.50 despite news that its Hong Kong chief executive Peter Wong Tung-shun had resigned and would be replaced by deputy chief executive Peter Sullivan. Lenovo was the top blue-chip gainer with a 5.93 per cent rise to $3.125 ahead of its second-quarter results today. Analysts were projecting strong earnings on the back of industry data showing a pickup in computer sales and reduced costs. Selected export firms were also in demand on the back of the US retail sales data which showed its biggest monthly rise in five months. Micromotor maker Johnson Electric rose 1.3 per cent to $7.80 and athletic shoe manufacturer Yue Yuen Industrial gained 0.75 per cent to $20.20, although sourcing company Li & Fung fell 0.4 per cent to $12.60. Cheung Kong Infrastructure rose 1.52 per cent to $23.35 after the company said it would sell a 9.9 per cent stake in North of England Gas Distribution Network for $66.22 million, reducing its stake to 59.9 per cent. China Southern Airlines led China-related stocks higher after saying it would buy two smaller airlines from its parent for a total of 16.9 billion yuan. One broker said the acquisitions should have a positive effect on the airline's valuation as they are bought at about 15 times earnings compared with China Southern's forward price-earnings ratio of about 23. The stock jumped 8.53 per cent to $3.50. More than 3 per cent gains in basic material counters such as Anhui Conch Cement, Aluminum Corp of China, Jiangxi Copper and Maanshan Iron & Steel helped lift the H-share index 1.71 per cent, or 82.77 points, to 4,913.45.