(Bloomberg) — Hong Kong’s benchmark equity index headed for a technical bull market as stocks in the city extended this month’s stellar rebound sparked by overseas inflows.
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The Hang Seng Index rose almost 2% on Monday, taking its advance from a January 22 low to more than 20%. A close at these 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.
Stocks in Hong Kong are among the best performers globally in April, having rallied on the back of strong inflows from mainland Chinese investors, who according to some strategists are looking to diversify their currency exposure amid continued depreciation pressure on the yuan. There are also signs that foreign funds are rotating money away from expensive technology stocks in the US and elsewhere to snap up Chinese internet names, which command a high weighting on Hong Kong’s equity benchmark.
“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.”
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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 builder shares jumped 10%, the most since September. Shares of Macau casino operators also jumped after the introduction of measures to streamline the entry and exit process for Chinese citizens.
Tech Gainers
Food delivery giant Meituan and Tencent Holdings Ltd. — China’s biggest internet firm, are the biggest contributors to the Hang Seng’s advance since its Jan. 22 low, data compiled by Bloomberg show.
Up almost 9% in April, the HSI is among the best performers in a group of more than 90 global equity indexes tracked by Bloomberg. The gauge is now up over 5% in 2024 following an unprecedented four-year losing streak.
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.
“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 and Sangmi Cha.
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