It has been a remarkable year for equity investors. Over the past 12 months, Hong Kong's benchmark Hang Seng Index has more than doubled in value.
But bullish investors hoping for similar gains over the next 12 months are likely to be disappointed. The rally of the past year is not going to be repeated any time soon.
Today marks the very bottom of the financial crisis for the Hong Kong stock market exactly 12 months ago. It was a Black Monday if ever there was one. The Hang Seng Index plunged a gut-wrenching 15.4 per cent from the previous close to hit a five-year low at 10,676 points, down a mind-boggling 66.6 per cent from the record high set just one year before.
Since then, the market has bounced back in fine style. At first, the rally was tentative. Although stocks were trading at bargain basement prices, many investors feared that the death-spiral sell-off had not finished and that the apparent recovery was a dead-cat bounce: a suckers' rally in a continuing bear market.
But when the Hang Seng Index failed to plumb new depths in March when United States equities hit their low, observers took the local market's resilience as a powerfully bullish signal.
Since then, global investors have poured hundreds of billions of Hong Kong dollars into stocks listed in the city, powering an impressive run-up in equity prices.
As a result, at Friday's close, the Hang Seng Index was quoted at 22,590 points, up a meaty 112 per cent from its crisis low point reached just 12 months earlier (see the first chart below).
