Low valuations spur buying after sharp declines
Financial stocks surged in Hong Kong yesterday, as investors bought on low valuations in anticipation of more bailouts and stimulus measures from the government to tackle the financial crisis.
HSBC Holdings snapped a five-day, 29.91 per cent decline to gain 20 per cent, compared with the 14.35 per cent increase in the Hang Seng Index, of which it is the biggest constituent.
Of the mainland's largest lenders, Industrial and Commercial Bank of China advanced 16.43 per cent, China Construction Bank Corp surged 23.28 per cent and Bank of China rallied 22.22 per cent.
Mainland insurers China Life Insurance and Ping An Insurance (Group) rose 13.89 per cent and 8.33 per cent, respectively.
'Bank shares had been oversold because of redemptions from mutual funds and hedge funds in Hong Kong. With the completion of such moves, the shares will not hit new lows in the near future,' said Zheng Tuo, a fund manager at Bank of Communications Schroders Fund.
'Banks are generally undervalued, with some having a price-book ratio as low as 1:1. For mainland lenders, their performance is backed by a resilient economy,' Mr Zheng said.
