The Hong Kong stock exchange has been buzzing with trading activity and the prospect of further monetary easing in developed economies has left investors bracing for fresh waves of liquidity to lift the local market.
The current low-interest rate global environment reduces borrowing costs and makes it easier for investors to accumulate capital and pump it into areas where it could generate a return. Earlier this month, the Bank of Japan reduced its benchmark lending rate to between 0 and 0.1 per cent. The market is also expecting the United States central bank will unveil stimulus measures.
'Liquidity created from this kind of monetary easing policy may be looking for higher returns which makes it flow into emerging markets,' said Linus Yip Sheung-chi, a strategist at First Shanghai Securities.
'The figures are becoming more eye-catching, but actually fund flows into Hong Kong already started in September.'
Hong Kong's main board daily turnover topped HK$100 billion three times last week and five times over the past six weeks after previously only hitting that mark once all year. The benchmark Hang Seng Index has surged 15.7 per cent since the start of September.
'If I were a European or US investor, I would look at the US economy and European economy and I would have the urge to invest outside,' said Nicholas Yeo, director and head of equities (China/HK) at Aberdeen International Fund Managers.
