Hong Kong stocks rose, lifting the market to the highest level in 11 months, on optimism mainland China funds will support local equities whipsawed by US sanctions.
The Hang Seng Index surged 1.3 per cent to 28,276.75 at the close on Tuesday, the highest close since January 22 last year. That puts the market within less than 1 per cent of erasing all the losses since China locked down Wuhan, the epicentre of Covid-19 outbreak, about a year ago.
The Shanghai Composite Index rose 2.2 per cent. It slumped 1.1 per cent in its biggest pullback in three weeks on Monday.
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Mainland traders continued to pile into Hong Kong stocks after they bought a record HK$19.5 billion (US$2.5 billion) of the shares via the cross-border Stock Connect programme on Monday. They poured in another HK$10.8 billion on Tuesday, according to Bloomberg data.
China Mobile, China Unicom and China Telecom advanced by at least 6 per cent, extending gains on Monday on speculation mainland traders were buying the dip after a sell-off last week. The trio are now off-limits to US investors starting this week, banned under President Donald Trump’s November 12 executive order.
While unprecedented liquidity unleashed by central banks have helped power global stocks to new heights and stretched valuations, Hong Kong stocks remained in reasonable territory compared with their American or European peers even after a bright start to trading in 2021.
Companies in the Hang Seng Index are trading at 12.8 times projected earnings, the cheapest among the world’s major equity markets, according to data compiled by Bloomberg. The price-earnings multiple for the S&P 500 Index is 23.1 times, while that for the Euro Stoxx 50 is 18.5 times.
“The downtrend on earnings for Hong Kong stocks is already behind us and earnings will return to growth in 2021,” said HSBC Jintrust Fund Management in a weekly note. “Hong Kong stocks are expected to trend and reverse the downward trend over the past two years.”
Other major markets in Asia were mixed, with the benchmark gauges in Australia and South Korea falling and that in Japan rising. Malaysia’s KL Composite Index dropped by as much as 1.6 per cent after the Southeast nation declared the state of emergency to stem a surge in Covid-19 infections. US stocks fell for the first time in five days in overnight trading, as cautious sentiment dominated the market.
The yield on 10-year Treasuries topped 1 per cent for the first time since March, stoking jitters that the days of easy money will end soon. Morgan Stanley turned neutral from bearish on the US dollar, citing the possibility that the Federal Reserve will normalise monetary policies as early as June.
In Hong Kong, China Mobile rose 6.6 per cent to HK$46.80, extending a 5.8 per cent rally a day earlier. China Unicom climbed 6 per cent to HK$4.94 after rising 5.7 per cent on Monday and China Telecom surged 10 per cent to HK$2.19.
On the mainland trading, Kweichow Moutai gained 2.9 per cent to a record 2,160.90 yuan, capitalising the world’s most valuable liquor distiller at 2.71 trillion yuan (US$419.1 billion). That valuation has exceeded the size of Shenzhen’s economy in 2019. The stock could remain more valuable than that economy in 2021 if some of the bullish price forecasts come true.
Jiangsu Chuanzhiboke Education Technology surged by the 44 per cent daily limit to 12.18 yuan on the first day of trading in Shenzhen.
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