(Bloomberg) — Hong Kong’s benchmark equity index headed for a technical bull market as a surge in Chinese property shares gave more impetus to this month’s stellar rebound.
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The Hang Seng Index jumped more than 2% on Monday, taking its advance from a January 22 low to over 20%. A close at those levels will see the gauge meet the definition of a bull market, joining a cohort of other indexes in China and Hong Kong that have reached such a milestone in recent weeks.
Monday’s trading witnessed a broadening of the rally that has seen equities in Hong Kong rank among the best performers globally in April, with Goldman Sachs Group Inc. saying that a “fear of missing out” may be building up. The gains have come on the back of strong inflows from the mainland as well as a rotation by global funds into relatively cheap Chinese internet stocks, which carry a high weighting on the Hang Seng Index.
“The recent rally and out-performance were likely driven by some re-allocation flows as global risk sentiment took a hit and China, with its deep discount, found some support from investors,” strategists at Nomura Holdings Inc., including Chetan Seth, wrote in a note. “Thus, we think China may continue to outperform, especially in a scenario where global risk sentiment remains cautious.”
On Monday, property stocks were leading gains in the broader market, with sentiment boosted after a major developer reached a solution with bondholders for its liquidity issues. A Bloomberg Intelligence gauge of builders’ shares jumped more than 12%, the most since November 2022. Shares of Macau casino operators also surged after the introduction of measures to streamline the entry and exit process for Chinese citizens.
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“People are getting excited over a potential shift in policy mindset toward the property sector,” amid talk that policymakers will focus on driving demand, with the government buying up unfinished projects, said Zhang Hao, chief investment officer at Granford (Beijing) Capital Management Co. “The rally in Hong Kong today is really driven by these hopes and it could have more legs as valuations have been depressed for such a long time.”
China is set to hold a politburo meeting this week to discuss the current state of the economy and assign key tasks and policies for the remainder of this year. Investors will watch the event for any tweaks in the language on policy support to boost growth.
Bull Market
Equities in China and Hong Kong are rebounding after a multi-year slump, thanks to cheap valuations, some green shoots in the world’s second-largest economy and its corporate earnings, as well as measures taken by authorities to revive investor confidence. However, lingering risks from geopolitical tensions and doubts over the sustainability of the economic rebound are still keeping investors wary of going all-in on the asset class.
Last week, it was the heavyweight tech sector that stood out, with the Hang Seng Tech Index climbing more than 13%. The gauge added to its advance on Monday and in the process erased all its losses for 2024.
Food delivery giant Meituan and Tencent Holdings Ltd. — China’s biggest internet firm, are the biggest contributors to the benchmark Hang Seng Index’s advance since its Jan. 22 low, data compiled by Bloomberg show.
Mainland Chinese investors are set to buy Hong Kong stocks via the southbound trading links for a 21st straight session on Monday, according to data compiled by Bloomberg. Turnover in Hong Kong jumped to the highest since July on Friday.
“Some positives have emerged – better macro in 1Q, solid corporate earnings so far, stock market support from the government, slightly better relations with US,” said Vey-Sern Ling, managing director at Union Bancaire Privee. “Volumes are high and if the rally continues, it can become self-sustaining as more funds come in for fear of missing out.”
The HSI and the Hang Seng China Enterprises Index have each jumped more than 8% in April to rank among the best performers in a group of more than 90 global equity indexes tracked by Bloomberg. Both gauges capped an unprecedented four-year losing streak in 2023.
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“The HSI successfully broke through the key resistance level of the 250-day moving average,” said Dickie Wong, executive director of research at Kingston Securities Ltd. “It will probably achieve the next target at 18,300 within the second quarter.”
–With assistance from John Cheng, Sangmi Cha, April Ma and Abhishek Vishnoi.
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