Editorial | Sustained Hong Kong bull market first step in proving doubters wrong again
- Rebound of Hang Seng Index may have confounded the doom mongers, but city also needs to attract liquidity and reclaim a top position for IPOs
Pundits have written Hong Kong off before, and may do so again. They may not reckon with the city’s resilience, or capacity to bounce back, as seen by the stock market’s recent surge into bull market territory.
From a 15-month low under 14,800 in late January, the Hang Seng Index (HSI) has climbed above 19,000 for the first time since August. This confounds a lament not long ago by Yale economist Stephen Roach, the former chairman of Morgan Stanley Asia, that “Hong Kong is now over”.
But it remains to be seen whether a turnaround sparked by government backing on both sides of the border is sustainable.
Investor confidence returned after a series of stimulatory and market support measures by mainland authorities, beginning with the central bank cutting the reserve ratio requirement for banks. That not only added about a trillion yuan to China’s markets, but was positive for Hong Kong stocks.
The markets really took off after mainland regulators on April 19 unveiled five measures to deepen cooperation with the city, shore up investor confidence and boost its status as an international financial centre.
They included plans to relax the eligibility criteria for exchange-traded fund products in the Stock Connect mechanism, which links mainland financial hubs with Hong Kong. The HSI has risen every day since then except for three trading days.