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Tuesday, March 21, 2017, 19:26

Hong Kong blue chips world’s top performers

By Luo Weiteng
Hong Kong blue chips world’s top performers
This Dec 30, 2016 photo shows pedestrians walking past a sign showing the Hang Seng Index on the last day of trading for 2016 in the Central district of Hong Kong. (Isaac Lawrence / AFP)

HONG KONG – Hong Kong’s blue-chip Hang Seng Index (HSI) is the leading gainer among indices in the world’s leading developed markets so far this year as capital flows from the Chinese mainland boost stock prices.

The lower valuations of most Hong Kong stocks would continue to draw capital from the Chinese mainland south

Zhang Yidong, Analyst, Industrial Securities

The benchmark climbed 0.37 percent or 91.13 points to close at 24,593.12 on Tuesday, marking a new high since mid-August 2015 and boosting year-to-date gains to 11.78 percent. This caps the 9.88 per cent rise of Singapore’s FTSE Straits Times Index, the 9.63-percent increase for the United States’ NASDAQ Composite Index and 6.07 percent advance of the S&P 500 Index in New York.

Zhang Yidong, an analyst at Shanghai-listed brokerage Industrial Securities, believed the Hong Kong stock market was hosting a “new bull run” with most of the momentum from southbound capital flows.

The net southbound capital flow through the Shanghai and Shenzhen stock connect schemes hit 3.57 billion yuan ($518 million) on Tuesday, after hitting a 15-day high of 3.73 billion yuan on Monday.

READ MORE: Lam supports HK-mainland Bond Connect

Stocks of Hong Kong-listed mainland firms naturally become magnets for southbound capital flows, shown by the 13.3 percent increase of the Hang Seng China Enterprises Index (HSCEI) so far this year.

Financial institutions such as insurance companies, banks and fund managers are the major driving forces. Zhang said investment-hungry mainland insurers, in particular, demonstrate a huge appetite for blue-chips in Hong Kong which have long been underpriced, while investors with a long investment horizon favored growth stocks which are known for their good management mechanism and competitiveness.

The lower valuations of most Hong Kong stocks would continue to draw capital from the Chinese mainland south, he added.

The Hang Seng China AH Premium Index, which tracks the price gap between shares listed on the mainland and in Hong Kong, has dropped to its lowest level since December 2015 but Hong Kong stocks remain as good bargains, with the HSI trading at a price-to-earnings ratio of 13.28.

Some market watchers believed southbound capital flow was far from the whole story behind the rally in Hong Kong stocks.

ALSO READ: Investors hope for bond connect scheme

"Basically, the red-hot Hong Kong stock market is a story of winning by default, as investors rush to park their money in a stable, developed market amidst a fresh bout of global uncertainties,” said Jacob Zhou, a Hong Kong-based analyst with one of the “Big Four” accounting firms.

"This is where Hong Kong comes in,” Zhou reckoned.


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