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.
