(Bloomberg) — Chinese stocks listed in Hong Kong rose to their highest in nearly two years, adding to the stimulus-fueled euphoria of traders returning from a public holiday.
Most Read from Bloomberg
The Hang Seng China Enterprises (^HSCE) index rose as much as 8.5%, extending its winning streak to 13 days. Property developers led gains by a gauge that trailed the sector by 35%, a record intraday gain, while an index of brokerage stocks, a barometer of risk sentiment, rose 32%. Mainland Chinese markets will be closed for a week-long holiday until October 8.
“Previously underexposed hedge funds and mutual funds are now moving into Chinese assets,” said Billy Leung, investment strategist at Global X Management in Sydney. “These moves are supported by a broader reversal in key markets such as copper and Asia Pacific currencies, driven by renewed confidence in China’s growth.”
Sentiment toward stocks in the world’s second-largest economy has seen a dramatic turnaround since early last week, when officials unveiled several stimulus measures, including interest-rate cuts, freeing up cash for banks and liquidity support for stocks. . All four major cities eased home-buying restrictions and the central bank moved to lower mortgage rates.
Confidence is growing that the blitz of stimulus has ended a three-year slide in Chinese stocks fueled by a faltering economy and years of asset crunch. However, there have been several false dawns, most recently the rally that started in February, so investors have ample reason to be cautious.
So far, attractive valuations have helped attract investors after a prolonged slump in Chinese stocks.
Even with the recent rally, the Hang Seng China Enterprises Index still trades at less than nine times trailing 12-month earnings, less than half that of the S&P 500 ( ^GSPC ), as compiled by Bloomberg.
Amid optimism Wednesday, brokerage firms will be among the main beneficiaries of the stock trading frenzy as they earn a commission on each trade. China Merchants Securities Co. Up to 76%, Quolian Securities Co. Up to almost 50%.
Hedge funds are piling into Chinese stocks at an unprecedented pace, according to Goldman Sachs Group Inc. Leveraged funds posted record net purchases of Asian stocks in September, led by China and Hong Kong, according to data from the investment bank’s Prime Brokerage Desk.
Billionaire investor David Tepper is buying more of “everything” related to China, while the world’s largest money manager, BlackRock Inc. Now buying overweight Chinese stocks. US-based Mount Lucas Management has entered favorable positions in China exchange-traded funds, while Singapore’s GAO Capital is buying Chinese large-cap stocks.
“If subsequent policies exceed expectations, I think the bull market will last three months to half a year,” said US Tiger Securities Inc. said Bo Pei, stock research analyst. “A correction in the middle of such a sharp rise is not unusual. What matters is whether it can continue to rise after the correction. I am personally very optimistic.
The impact of the stock market boom is also seen in the currency market.
A gauge measuring one-month borrowing costs in Hong Kong dollars rose for an eighth straight day since August, as liquidity tightens amid seasonal demand for cash and a rally in stocks. Hong Kong’s currency rose to trade at a stronger end of its trading session and the offshore yuan also strengthened.
The stock rally was so powerful that in just eight days, China regained the weight it had lost over the past 10 months in emerging market indices.
According to data compiled by Bloomberg based on stocks listed on the Mainland, Hong Kong and overseas markets, MSCI Inc. The country’s share of developing countries’ stock index rose to 27.8% at the end of September, the highest since November 2023. .
Chinese stocks have led global equity benchmarks over the past month. The Hang Seng China Enterprises Index topped the list with a 31% gain, while the Hang Seng Index was second at 28%.
“We remain very bullish on China’s economic outlook,” Sylvia Sheng, global multi-asset strategist at JP Morgan Asset Management, wrote in a client note. “Positive signals from the Chinese government and regulators and increased focus on supporting economic growth and stabilizing the property sector will help put a floor on market prices and boost momentum in equity markets.”
– With assistance from John Cheng and Tian Chen.
Most read from Bloomberg Businessweek
©2024 Bloomberg LP
2024-10-02 11:05:43