HK stocks soar to new 7-year high on China money
Singapore
THE Hong Kong stock market on Thursday surged a massive 1,685 points or 6.4 per cent to 27,922 points - this after it had already shot up almost 4 per cent on Wednesday.
Underpinning these gains was the common "catch-up argument" - that the sharp rally in China stocks this year and over the three days that the Hong Kong market was closed for Easter had left the latter to play catch-up.
By the end of trading on Thursday, however, the Hang Seng Index had shed a chunk of its earlier gains, recording a net gain of just 707.73 or 2.7 per cent for the day at a new seven-year high of 26,944.39. Turnover came to HK$293 billion (S$51.3 billion). So far this week, the HSI has risen 6.6 per cent, taking its gain for the year to 14 per cent.
According to Reuters, Chinese investors snapped up the entire 10.5 billion yuan (S$2.3 billion) daily investment quota for buying Hong Kong stocks under the Shanghai-Hong Kong Stock Connect scheme, the second day in a row the quota was used up.
The Financial Times reported that Chinese investors have been opening new accounts in Shanghai at a record pace, stuffing cash into equities and that valuations in some Chinese companies have gone sky-high, turning Hong Kong's market into a comparative bargain.
Investors are thus turning to Hong Kong after a dramatic 22 per cent surge this year by the Shanghai Composite made the market too expensive.
"Our understanding is that the rising valuation gap now makes Hong Kong-listed Chinese shares compelling bargains to mainland investors," wrote Nomura equity strategist Wendy Liu in a research note quoted by CNN Money.
Brokers here were stunned at the size and speed at which the Hang Seng took off, catching most by surprise. "Hong Kong's volume is maybe fifty times ours and all we have to show for it is heavy volume in penny stocks," said a dealer, summarising sentiment here.
In comparison, the Straits Times Index finished 0.83 of a point lower at 3,460.3, with turnover amounting to three billion units worth S$1.35 billion. The average value per unit traded was S$0.45 and 18 of the top 20 actives were priced at or below S$0.20.
The main focus among blue chips was commodities firm Noble Group, whose shares dropped S$0.05 or 5.5 per cent to S$0.86 on a volume of 132.6 million after short-seller Muddy Waters announced that it had shorted Noble's shares.
READ MORE: China tycoons approaching US$50b in gains on HK stock rally
