World Stock Watch

Hong Kong’s stock market witnessed a remarkable surge on Wednesday, as investors returned from a public holiday, fueled by the recent stimulus measures announced by the Chinese authorities. The Hang Seng China Enterprises Index soared as high as 6.6%, marking its 13th consecutive day of gains, the longest streak since January 2018. Property developers and brokerage firms led the charge, with their respective indexes leaping as much as 30% and 25%. The rally is attributed to growing optimism about China’s economic prospects and the attractiveness of its risk assets, following a series of stimulus measures unveiled last week. These measures included interest-rate cuts, increased liquidity for banks, and support for the stock market. Furthermore, four major cities relaxed their home-buying restrictions, and the central bank lowered mortgage rates. According to Billy Leung, an investment strategist at Global X Management, the extended rally reflects a significant shift in investor sentiment, as hedge funds and mutual funds, which were previously underexposed, are now pouring into Chinese assets. The relatively low valuations of Chinese stocks, which have been declining for three years, are also drawing investors in. The Hang Seng China Enterprises Index is currently trading at around 8.7 times estimated earnings for the next 12 months, significantly lower than the five-year average of 8.4 times and less than half that of the S&P 500. Brokerage shares, a key indicator of risk appetite in China’s equity markets, also experienced a significant surge, with China Merchants Securities Co. rising as much as 59% and Citic Securities Co. and Guolian Securities Co. both gaining over 25%. Hedge funds are also jumping into the fray, with US-based Mount Lucas Management, Singapore’s GAO Capital, and South Korea’s Timefolio Asset Management all taking bullish positions on Chinese stocks. Tribeca Investment Partners in Sydney is also snapping up proxies such as Australian miners. Despite the rapid rise, analysts remain optimistic, with Bo Pei, an equity research analyst at US Tiger Securities, predicting that the bull market could last for several months if subsequent policies continue to exceed expectations.