Hong Kong’s stock market benchmark has again climbed to its highest level in more than three years, buoyed by market optimism. Equity analysts expect the strong southbound capital flows and low HIBOR (Hong Kong Interbank Offered Rate) to support the Hong Kong securities market, which is still undervalued. 

The Hang Seng Index surged past the 25,000-point mark during Monday morning’s trading, hitting 25,010 points — a record high since February 2022. The equity market benchmark closed 0.68 percent higher to finish at 24,994 points on a market turnover of HK$263 billion ($33.5 billion) on Monday.

The Hang Seng China Enterprises Index — a barometer of Chinese mainland companies — edged up 0.6 percent to finish at 9,040 points, while the city’s technology stock gauge — the Hang Seng TECH Index — picked up 0.84 percent to close at 5,585 points.

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“The US stocks are overvalued with a price-to-earnings ratio at a multiple of 25 while Hong Kong stocks remain attractive with a P/E ratio at a multiple of 15. High-risk investors may consider Chinese mainland and Hong Kong funds,” said Michael Chan, managing director at GUM, a homegrown mandatory provident fund (MPF) consulting firm.

“Although the IPO pipeline remains strong and inflows from the Southbound Stock Connect have started to slow, that did not exert significant upside pressure on HIBOR. We expect HIBOR rates to stabilize at lower levels that can mildly stimulate the economy, with excess liquidity flowing into Hong Kong dollar-denominated assets,” said Carlos Casanova, Asia senior economist at Switzerland-based private bank Union Bancaire Privee (UBP).

Value Partners Group said, “The Hong Kong equity market continues to be supported by strong southbound flows. Given the ample liquidity, the HIBOR may continue its uptrend, but will remain much lower than before.”

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The global investment fund manager said that the Hong Kong market benefits from passive fund inflows due to abundant global liquidity. “With further US-China trade negotiations and potential improvement in the relationship, active funds may narrow their underweight (on the Hong Kong market) over time.”  

The policy to maintain market trading during extreme weather since last September and other reform measures have further aligned Hong Kong’s securities market with international practices, and have enhanced the special administrative region’s competitiveness as a global financial center by improving financing platform efficiency and attracting more investors to the local market, Chief Executive John Lee Ka-chiu said in his social media posts on Monday.  

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He added that the HKSAR government will continue to improve the listing system and promote stock market liquidity and high-quality company listings so that the city’s attractiveness and vitality as a listing location can be further strengthened.

“As of mid-July this year, there had been 52 initial public offerings — an increase of 30 percent, year-on-year, raising a total of HK$124 billion, up 5.9 times year-on-year — ranking Hong Kong’s IPO market as the world’s first in terms of proceeds to date. The Hang Seng Index has risen 25.3 percent so far this year,” Lee said.