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An electronic board showing the Hong Kong stock tickers near the Hong Kong Excanges and Clearing office in Central. Photo: AP

Hong Kong stocks retake nine-month high in late rally as traders focus on recovery prospects

  • Technical indicator flashes an overbought signal after an 11 per cent rally in November pushes the market towards its best month since April 2015
  • Hang Seng Index’s price-earnings ratio has risen to 14.7 times, making stocks the most expensive in a decade
Hong Kong stocks rose for a fifth day to a nine-month high, after a late afternoon rally built on optimism about economic recovery.

The Hang Seng Index gained 0.6 per cent to 26,819.45 at the close on Thursday, retaking the highest level since February it hit earlier this week. The gauge advanced even as its 14-day relative strength indicator rose to 73.9. A reading above 70 signals stocks are technically overbought and are due for declines. The Shanghai Composite Index rose 0.2 per cent.

Other major markets in Asia were mixed, with Japan’s Nikkei 225 and South Korea’s Kospi rising and Australia’s S&P/ASX 200 losing ground. US stocks retreated from all-time highs overnight, as weekly jobless claims recorded the first back-to-back increase since July and trade deficit widened.

“The data was slightly negative but dramatically so. Investors booked some recent gains,” said Jeffrey Halley, an analyst at Oanda. “With bottomless amounts of cheap central bank cash, and vaccine candidates emerging, the great rotation trade, and asset price appreciation in general, is set to continue. Keep buying dips.”

The Hang Seng gauge has risen 11 per cent this month, heading for its best monthly performance since April 2015, as news on the success of three vaccines for Covid-19 fuelled optimism about an economic recovery. The run-up took the market valuation to 14.7 times earnings, the highest level in a decade, according to Bloomberg data.

Hong Kong faces another 82 potential cases on Thursday, after confirming 85 new infections on Wednesday, the highest daily increase in more than three months, prompting the government to declare another community testing scheme and shut down some entertainment venues.

Economists at JPMorgan Chase said the global economy will reflect a down-up movement next year, much like in 2020, providing considerable risks in outlook for next year and beyond.

“The dynamics around the latest virus outbreak and the vaccine roll-out are key sources of uncertainty,” they said in a special report dated November 24. “However, it is the unprecedented tension created by a global economy generating very strong growth alongside substantial imbalances that provides the major source of uncertainty.”

China starts probe into electric-car makers after shackling fintech companies

Among the gainers, Chinese Petroleum & Chemical jumped 4.9 per cent to HK$3.83 and Chinese social-media giant Tencent Holdings added 2.3 per cent to HK$586. Alibaba Health Information Technology jumped 7.6 per cent to HK$21.20 after booking a first-half net income of 278.6 million yuan (US$42.4 million) from a loss a year earlier. The gain was the steepest since July 21.

Geely Automobile slid by as much as 4.6 per cent before closing unchanged at HK$22.90. China’s state planner asked local governments at the provincial level to investigate construction and production at new-energy vehicle projects, signalling heightened scrutiny of the hot sector.

In the mainland, Beijing Telesound Electronics surged by 44 per cent, the maximum allowed for debutants on the main board, to 29.17 yuan in Shenzhen on the first day of trading.

More initial public offerings (IPOs) are in store in the coming weeks, apart from JD Health’s ongoing plan to raise as much as US$4 billion.

Evergrande Property Services’ IPO will involve HK$14.3 billion, after the firm set its offer price at HK$8.80 per share or near the lower end of guidance between HK$8.50 and HK$9.75. About HK$7.1 billion will accrue to Its parent China Evergrande Group, which is selling down its stake. The stock will start trading on December 2.

Additional reporting by Georgina Lee