Translated by Andrew Vanburen from a Chinese language piece by Ms. Gao Juan of Victory Securities in Sinafinance
DON’T LOOK NOW, but Hong Kong’s benchmark Hang Seng Index is up an impressive 28.3% since early October, and shot up a full 2% on Thursday.
So apparently not every investor is wringing their hands in Hong Kong these days.
In fact, it is quite possible that there will be an extended upswing in the Special Administrative Region’s capital market.
The possibility is more than likely and I’d put my money on it.
Let’s take a look at the big picture out there.
First, Hong Kong has decidedly been the better bet of late in the region, with the bourse’s chief rival – the Shanghai Composite Index which tracks PRC-listed A and B shares – losing some 9.7% of its value since mid-November.
Second, news from the US on the employment, earnings and debt accumulation front is not exactly encouraging.
And it is impossible to ignore the daily warnings that seem to grab headlines about the possible demise of the EU as individual member states there struggle to stay afloat amid cripplingly overleveraged balance sheets.
But one can point to recent daily numbers from Hong Kong as a beacon of hope for continued strength in the local capital market.
On Wednesday, the Hang Seng opened strong and surged to over 20,500 before cooling off in afternoon trade to close at 20,333, losing 0.28% on the day.
Intraday trading volume hit 61.6 bln hkd, down 15% from Tuesday’s total but still above the vibrant threshold of 60 bln.
This is a glowing health report for the overall level of confidence in the market, with shipping stocks and China’s Big Three petroleum heavyweights leading the charge.
And then on Thursday, the Index jumped a full 2%, and 21,000 should be the next target within sight.
Back on Tuesday, US stocks softened, Europe headed higher and Asian bourses all marched into positive territory.
On the PRC data front, the critical Purchasing Managers Index (PMI) – the key barometer of a country’s manufacturing vitality – came in higher than expected at 50.5 for January, up from 50.2 the previous month.
This stumped analysts who generally expected a contraction in activity for the month and helps lend support to the possibility that the world’s No.2 GDP is on target to experience a coveted soft landing.
In fact, last month, new orders in Mainland China hit a three-month high.
It would appear that Central Bank action in Beijing seems to have taken the right path these past few months.
And lest we forget, one needn’t remind investors in Hong Kong where most of the listed firms here have their production facilities?
Or indeed where a vast number of counters here are headquartered? Or where they do the bulk of their business?
Beijing began talking of “decoupling” back in the dawn of the global downturn in 2008, when the PRC hoped to lessen its obvious over-reliance on the largesse of the US consumer and look inward for profits.
Perhaps with Hong Kong’s capital market seeming to move independently of global bourses and economic statistics, as well as our heavy reliance on the 1.3 bln-strong giant neighbor to the north, the local stock market is undergoing a “decoupling” of its own.
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