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[HONG KONG] Hong Kong stocks climbed to the highest level since December 2007 as volatility surged and an unexpected drop in Chinese exports spurred speculation that authorities will increase stimulus to support economic growth.
Hong Kong Exchanges & Clearing Ltd jumped 19 per cent as Goldman Sachs Group Inc raised its target price. China Merchants Bank Co climbed by a record in Hong Kong after announcing plans to sell shares. Almost all foreign-currency B shares traded on mainland exchanges gained by the 10 per cent daily limit. Data Monday showed overseas shipments fell 14.6 per cent in Marchin yuan value, while imports also slumped.
The Hang Seng Index rose 2.2 per cent to 27,881.85 at 3:44 pm in Hong Kong. The benchmark gauge has climbed 14 per cent in an eight-day rally after mainland authorities made it easier for domestic funds to use the cross-border bourse link. The Hang Seng China Enterprises Index of Chinese stocks traded in the city advanced 3.9 per cent, while the Shanghai Composite Index climbed 2.2 per cent.
"The investor in Shanghai is realizing that there is a better risk-return opportunity on offer in Hong Kong," Jonathan Garner, Hong Kong-based chief strategist for Asia and emerging markets at Morgan Stanley, said in a phone interview.
"We now see a greater likelihood of the Hang Seng's valuation converging with its own long run average. The catalyst is the inflow from the Shanghai investor via the connect program."
The HSI Volatility Index jumped to its highest level since June 2012, while the Hang Seng measure's relative strength index rose to 89.1, the highest since February 1989. The Shanghai Composite's RSI was above 70 Monday for the 19th straight day. Levels above 70 signal to some traders that gains have gone too far, too fast.
Train makers CSR Corp and CNR Corp advanced by maximum allowed in Shanghai, leading gains by industrial shares.