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Thursday, July 21, 2016, 16:31

HK rally resumes as global sentiment seen to improve

By Reuters
HK rally resumes as global sentiment seen to improve
Riding on improving global confidence and a stronger US dollar, Hong Kong’s benchmark Hang Seng Index hit the year’s high on Thursday, erasing a seven-month loss. (Roy Liu / China Daily)

Hong Kong stocks resumed their journey northwards on Thursday, propelled by positive global market sentiment and another record showing on Wall Street.

The benchmark Hang Seng Index (HSI) hit the year’s high at one stage in afternoon trading at 22,118 points, taking its gain from a three-year low in February to more than 20 percent, technically entering a “bull market”. The gauge, after a breather on Tuesday following a five-day rally, finished up 0.54 percent, or 118 points, at 22,000 points — the first time it had touched that level in seven months.

The Hang Seng Enterprises Index chalked up 0.4 percent to 9,057, on the day’s turnover of HK$65.28 billion. Property developers and mainland telecom companies fared well.

Market gurus had mixed views on whether the “bull market” can be sustained in the second half of the year.

“I’m positive about the local stock market for the next half,” said Sean Taylor, managing director of Deutsche Asset and Wealth Management.

He’s convinced that the local bourse is in for a bull run as global markets continue to make big inroads in anticipation of central banks stepping in to prop up their countries’ economies, and as prospects of a fresh US interest-rate hike this year subside.

Hong Kong investors took heart from the strong momentum of US stocks, with the Dow Jones Industrial Average surging ahead for nine consecutive days since July 7, registering the longest upward trend since March 2013.

Sentiment was also boosted by hopes of the Shenzhen-Hong Kong Stock Connect — the second stocks trading link between the SAR and the mainland — kicking off within two months, further injecting life into the local market.

Taylor said the latest rally has been aided by the possible delay of a US interest-rate hike and the Chinese mainland economy stabilizing.

“As the US Federal Reserve is expected to delay any fresh interest-rate increase, investors are actively looking for investments. At the same time, the Chinese economy has stabilized in the second quarter, helping to restore market confidence,” he said on Thursday.

HK rally resumes as global sentiment seen to improve

Major banks have reservations about a “bull market”. Projecting a “neutral” outlook, Citibank expects the benchmark index to fluctuate between 19,500 and 23,000 points in the second half of the year, with a target of 21,500 points for 2017.

The US bank stressed that the global economy is still fraught with uncertainties, such as Brexit concerns, US rate hikes, as well as stabilization of the mainland economy.

“Overall, we think the trend in the second half will be similar to that of the first half,” said Catherine Cheung, head of investment strategy and portfolio advisory at Citibank Global Consumer Banking.

“The impending launch of the Shenzhen-Hong Kong Stock Connect may augment liquidity in the market. However, we cannot expect the power of the Shenzhen Stock Connect to be as strong as the Shanghai link, which helped lift the HSI to 28,000 points last year,” she added.

Citibank has forecast a growth rate of 6.2 to 6.3 percent for the mainland economy in the second half — lower than the 6.7 percent in the first half — with the renminbi’s fluctuation after Brexit likely to hurt the nation’s export performance and drag down economic growth.

According to the results of an investor confidence survey released by JP Morgan Asset Management on Monday, respondents have been increasingly pessimistic about the local stock market for the next six months.

Up to 87 percent of those polled between June 1 and June 23 believed that the HSI will hover below 22,000 in the third quarter, compared with 72 percent for the second quarter. The survey covered 500 people aged between 30 to 60 with at least five years of continuous investment experience and minimum liquid assets of HK$100,000.
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