(Bloomberg) — Hong Kong’s benchmark stock index headed for a technical bull market as stocks in the city extended their stellar rally this month, fueled by overseas inflows.
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The Hang Seng Index rose nearly 2% on Monday, rising to over 20% from a low on Jan. 22. A close at these levels sees the indicator meet the definition of a bull market, joining a cohort of other indices in China and Hong Kong that have reached such a milestone in recent weeks.
Hong Kong stocks were among the best performers globally in April after rising on strong inflows from investors from mainland China who some strategists say are looking to diversify their currency exposure amid ongoing devaluation pressures on the yuan. There are also signs that foreign funds are shifting money away from expensive technology stocks in the U.S. and elsewhere and into Chinese internet stocks, which weigh heavily in Hong Kong’s equity benchmark.
“Some positives have emerged – better macroeconomic performance in Q1, solid corporate earnings so far, government support for the stock market, slightly better relations with the US,” said Vey-Sern Ling, managing director at Union Bancaire Privee. “Volumes are high and if the rally continues it may become self-sustaining as more funds come in for fear of missing out.”
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On Monday, real estate stocks posted the biggest gains in the broader market. Sentiment improved after a major developer reached a solution to its liquidity problems with bondholders. A Bloomberg Intelligence gauge of construction company stocks rose 10%, the most since September. Shares of casino operators in Macau also jumped after introducing measures to simplify the entry and exit process for Chinese citizens.
Tech Gainer
Food delivery giant Meituan and Tencent Holdings Ltd. — China’s largest internet company — are the biggest contributors to the Hang Seng’s rise since its Jan. 22 low, data compiled by Bloomberg show.
With a gain of nearly 9% in April, the HSI is among the top performers in a group of more than 90 global stock indexes tracked by Bloomberg. After an unprecedented four-year losing streak, the value is now up over 5% in 2024.
Stocks in China and Hong Kong are recovering from a multi-year slump thanks to cheap valuations, some uptick in the world’s second-largest economy and its corporate profits, and measures taken by authorities to restore investor confidence. However, ongoing risks arising from geopolitical tensions and doubts about the sustainability of the economic recovery are still deterring investors from investing in this asset class.
“The HSI successfully broke through the key resistance level at the 250-day moving average,” said Dickie Wong, executive director of research at Kingston Securities Ltd. “The next target is likely to be reached in the second quarter at 18,300.”
– With support from John Cheng and Sangmi Cha.
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