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Monday, September 5, 2016, 16:47

Market in high gear as rate hike fears dim

By Luo Weiteng
Market in high gear as rate hike fears dim
Hong Kong stocks rocketed to a one-year high at the close of trading on Monday, propelled by optimism of a delayed US interest-rate hike, as well as continued capital inflow from the Chinese mainland. (Parker Zheng / China Daily)

Hong Kong stocks started the week on a high note, underpinned by heightened expectations that the US Federal Reserve may put off an interest-rate hike this month on slowed US job growth and the continued inflow of hot money from the Chinese mainland.

The benchmark Hang Seng Index advanced 1.65 percent to a fresh one-year high of 23,649.55 at the close on Monday, extending a winning streak to a third session. The Hang Seng China Enterprises Index picked up 1.48 percent to 9,830.57.

The rally echoed a positive mood among global stock markets. On the mainland, the Shanghai Composite Index climbed 0.15 percent to finish at 3,072.095, while the Shenzhen Composite Index inched up 0.44 percent to 2,018.102.

Other Asian shares also tracked gains on Wall Street, with Japan’s Nikkei 225 Index rising 0.66 percent and South Korea’s KOSPI jumping 1.07 percent.

“Last week’s weaker-than-expected US jobs report prompted investors to see the dimming chance of a hike in borrowing costs in September. Such sentiment lent great support to Hong Kong stocks,” said Hannah Li Wai-han, a strategist at UOB Kay Hian (Hong Kong).

All three major US indexes were higher on Friday. The Dow Jones Industrial Average finished 0.39 percent up, the S&P 500 gained 0.42 percent and the Nasdaq Composite rose 0.43 percent at the close.

Hong Kong’s stock market continued to gather momentum with the continued inflow of funds from the mainland, where bargain-hunting investors are pinning hopes on the upcoming Shenzhen-Hong Kong Stock Connect and cashing in on the valuation discount in Hong Kong stocks.

Mainland investors forked out 3.9 billion yuan ($583.7 million) on Monday, snapping up Hong Kong stocks under the Shanghai-Hong Kong Stock Connect, following a record 4.8 billion yuan spent last Friday and similar big splashes on the previous two days.

Data showed that southbound trading turnover accounts for a remarkably growing proportion of the daily turnover on the local bourse, rising from 3.28 percent a week ago to 7.7 percent on Monday.

The buying spree gave a much needed boost to local investors, who had witnessed three market crashes since last summer, trimming the market’s losses from a low of HK$50 billion to HK$10 billion.

Xiao Tian, an analyst at Shenzhen-based research and investing information platform Gelonghui Technology Development, believed that the robust momentum in Hong Kong stocks can be sustained.

“Basically, investors would welcome a ‘new normal’ in the Hong Kong stock market, with a steady stream of southbosund money inflow becoming part and parcel of the city’s stock market transactions, and narrowing the long-existing valuation gap between Hong Kong and mainland shares,” he said.

The second cross-border stocks trading link between Hong Kong and the mainland stands as another powerful force for money rolling southward. Such a trend fits in well with mainland investors’ growing appetite for overseas asset allocation amid a lack of attractive investment targets on the mainland and lingering concern over the yuan’s depreciation.

The Hang Seng China AH Premium Index has dropped from a peak of 140-150 to 121.64 — the lowest level in nearly one-and-a-half years.

Xiao reckoned that Hong Kong stocks are poised for another 23-percent increase in value.
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