Tue, Apr 14, 2015 - Page 15 News List

Volatility sends Hong Kong stocks to seven-year high

Bloomberg

Hong Kong stocks yesterday climbed to the highest level since December 2007 as volatility surged and an unexpected drop in Chinese exports spurred speculation that authorities would increase stimulus to support economic growth.

Hong Kong Exchanges & Clearing Ltd jumped 19 percent as Goldman Sachs Group Inc raised its target price. China Merchants Bank Co (招商銀行) climbed by a record in Hong Kong after announcing plans to sell shares.

Almost all foreign-currency B shares traded in Chinese exchanges gained by the 10 percent daily limit.

Data yesterday showed overseas shipments fell 14.6 percent last month in yuan value, while imports also slumped.

The Hang Seng Index rose 2.7 percent to 28,016.34 at the close. The benchmark gauge has climbed 14 percent in an eight-day rally after Chinese authorities made it easier for domestic funds to use the cross-border bourse link.

The Hang Seng China Enterprises Index of Chinese stocks traded in the territory advanced 4.3 percent, while the Shanghai Composite Index climbed 2.2 percent.

“The investor in Shanghai is realizing that there is a better risk-return opportunity on offer in Hong Kong,” Jonathan Garner, Hong Kong-based chief strategist for Asia and emerging markets at Morgan Stanley, said in a telephone interview.

“We now see a greater likelihood of the Hang Seng’s valuation converging with its own long run average. The catalyst is the inflow from the Shanghai investor via the connect program,” Garner said.

The HSI Volatility Index jumped 12 percent to its highest level since June 2012, while the Hang Seng measure’s relative strength index rose to 89.4, the highest since February 1989.

The Shanghai Composite’s RSI was above 70 yesterday for the 19th straight day. Levels above 70 signal to some traders that gains have gone too far, too fast.

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