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SCMP Reporter

Strong yen, capital hopes and US industrial output data revitalise HK after a long run of poor finishes

A stronger Japanese yen helped  lift  sluggish Hong Kong  stocks yesterday, along with other Asian markets, on hopes  possible  Asian currency appreciations may attract capital flows back to the region.

Last Friday's rebound on Wall Street  and stronger than expected  industrial output data from the United States also  fuelled  optimism, contributing to a 126.87 point,  or 0.94 per cent, rally in the blue-chip index - its biggest rebound since December 20.

The benchmark Hang Seng Index opened lower at 13,528.11 points but quickly climbed  to an intraday high of 13,636.77 before it narrowed the gain to finish at 13,621.65.

The yen spot rate  strengthened to  101.68  to the US dollar yesterday, compared with a previous closing of 102.05 yen and 104.81 yen a week ago.

Most key Asian markets, such as those in Indonesia, South Korea, Malaysia, the Philippines and Taiwan, gained between 1 per cent and 2 per cent yesterday.

Benefiting from the strong US industrial output data, both Li & Fung and Johnson Electric, which export to the US,   bested other blue chips with almost  5 per cent rallies in share price. Li & Fung, which sources garments and other consumer products for US customers, rose 60 cents, or 4.93 per cent, to $12.75.  Shares in motor maker Johnson Electric gained 35 cents, or 4.86 per cent, to $7.55.

HSBC rose $1 to $128.50, contributing a 35.8 point gain to  the index.

Last Friday, the US reported a 0.8 per cent rise in production at factories, mines and utilities, the best industrial output data in  four years.

The improved market sentiment saw  26  of the 33 blue chips  rise yesterday. Only PCCW and Esprit saw prices decline.

However, market watchers said, yesterday's gains  were just a reaction to  weeks in negative territory.

'This was just a technical rebound,' said Marvin Pang, the head of institutional sales at Core Pacific-Yamaichi International. 'If it is a solid rebound, you will see  much stronger turnover.'

Market turnover shrank  $5.78 billion from Friday's figure to $14.95 billion,  the lowest  trade  in two weeks.

Elizabeth Soon, a director and head of Pacific Basin investment with Standard Life Investments, is marginally overweight on  Hong Kong given the improving economic conditions.  Yet, in the short term, she is cautious.

'Valuation of Hong Kong shares, compared to the region, is not very cheap at this point.  In the short term, I don't see many catalysts to play up Hong Kong shares,' Ms Soon said.

In particular, she is not too optimistic  about property counters in the short run and believes the sector will see a correction.

'Discounts to the estimated  [net asset value] of many property counters have been narrowing and some are even trading at a premium,' Ms Soon said.

Boosted by hopes of  capital outflows from China to Hong Kong as the mainland  government  opens the door to  domestic welfare funds investing  overseas, H shares rallied 1.69 per cent, or 76.97 points,  to 4,617.57.

The market is widely expecting Xiang Huaicheng, the head of the National Social Security Fund, to bring more good news when he visits  Hong Kong this week.

Last week, Ping An Insurance  received government approval to invest  overseas, making it the first domestic insurer to do so.

Shares in China Shipping Development  soared 6.5 per cent to $6.55  -  the biggest gainer among the 38 H shares - followed by a 5.92 per cent  increase in Anhui Conch Cement  and a 5.52 per cent  surge in Aluminum Corp of China (Chalco).

Chinese airlines also benefited from the  news that  China and Taiwan had agreed  to resume cross-strait charter flights during the Lunar  New Year.

Shares in China Southern Airlines  rose five  cents, or 1.83 per cent,  to $2.775 while Air China shares gained 2.5 cents, or 0.87 per cent, to $2.875.



Optimists' return fuels  positive showing on HSI