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[HONG KONG] Hong Kong's benchmark equity gauge rose above the 30,000 level for the first time in a decade as energy producers and Chinese developers climbed.
The Hang Seng Index gained 0.6 per cent to 30,003.49 at the close. Hong Kong Exchanges & Clearing Ltd was the top performer on the day after Morgan Stanley raise its price target and turnover on the bourse climbed to a two-year high. Among this month's gainers, Tencent Holdings Ltd has surged 22 per cent, taking its market value above US$500 billion, while Ping An Insurance Group Co has jumped 23 per cent amid optimism over its digital expansion.
Hong Kong stock investors have had a rocky ride in the past 10 years, buffeted by the global financial crisis, the bursting of two different Chinese stock bubbles as well concerns over European debt. Hopes of a sustained rally in 2015 were dashed by turmoil in mainland financial markets. This year, however, has seen sustained inflows from across the border as well as dizzying rises in technology shares.
Gains in Hong Kong have helped fuel the wider regional rally in Asia, with the MSCI Asia Pacific Index headed for another record close Wednesday.
There's little sign of worry that the gains in Hong Kong will reverse any time soon. Goldman Sachs Group Inc. sees the gauge climbing to 32,000 by the end of next year, according to a note dated today, while Bocom International Holding Co's chief strategist Hao Hong says a rally in Chinese banks, insurers and technology shares will continue amid improving asset quality and earnings growth.
"New economy companies like Tencent as well as mainland banks and insurers are major contributors to this round of the rally, and the Hang Seng Index crossing above 30,000 points means that funds remain bullish on China and Chinese firms," said Linus Yip, Hong Kong-based strategist with First Shanghai Securities. "Allocations in such firms seem rational and will continue to push the index higher, despite some small hiccups on the way up." The Hang Seng Index still looks cheap relative to European or US benchmark gauges. The Hong Kong measure trades at 14 times reported profits, compared with more than 20 times for the Stoxx Europe 600 Index and the S&P 500 Index. The Hong Kong gauge is increasingly reliant on Tencent however, with the Chinese technology company accounting for almost a third of this year's gains.
There are signs of caution emerging. While the Hang Seng Index is up 6.2 per cent in November, 20 of its members are down for the month, compared with 29 that are higher. Investors trimmed holdings in some of the top performers on Wednesday, with Ping An falling 2.4 per cent, while Tencent slid 0.7 per cent.