In 2017, the Hang Seng Index delivered a return of 40.13%, versus 19.42% of the S&P 500. On Tuesday, the index jumped 500 points to close at 31,904, passing the previous all-time high attained on 30 October, 2007.
China is driving the index with a loose monetary policy, said Tobias Bland, CEO of Enhanced Investment Products in Hong Kong. The low interest rate environment releases a huge amount of liquidity in the system, which is the major source of money chasing the rally, he added.
“You are probably seeing the sentiment that rates have moved slower than they should, so there’s a huge amount of liquidity chasing this rally and that you’re going from momentum to value,” Bland told FSA. “[The run in old economy stocks] is because people believe that the loose monetary policy is going to remain here for longer than most people were probably expecting.”
Hong Kong’s market has also been fuelled by blue chips, including China’s tech giant Tencent, insurer Ping An and China Construction Bank.
Investor enthusiasm over new listings in the last few months have also played a role. In 2018, the debut of local eye care company C-Mer Eye Care Holdings received an oversubscription of 1500 times among retail investors, which set another record high. The stock traded 70% higher on its debut day.
During the fourth quarter of 2017, a spin-off of Tencent, online reading platform China Literature was oversubscribed by 625 times and gaming technology company Razer 290 times.
Alibaba coming to HK?
The Hong Kong Stock Exchange is planning new listing rules, aiming to attract more companies to list in Hong Kong. The reform is set to revamp rules so that companies with weighted voting rights are eligible.
Alibaba initially wanted to list in Hong Kong back in 2014, but Hong Kong’s regulator refused due to the company’s demand for a weighted voting rights scheme. Alibaba went on to list on the New York Stock Exchange instead and raised $25bn to become the largest IPO deal in history.
In view of Hong Kong Stock Exchange plans to revamping listing rules, Alibaba’s founder Jack Ma met the city’s chief executive Carrie Lam in China and said he would consider listing in Hong Kong, local media reported.
The change of rules, if enacted, would attract large-cap tech firms in China to list in Hong Kong, which would help cement the SAR’s role as an international financial hub across Asia, said Ken Peng, Citi Private Bank investment strategist for Asia-Pacific, who also likes China’s “old economy” industrial sector.
The new rules would also attract foreign capital and drive the performance of the Hong Kong market in 2018, he added. Therefore, he is bullish on brokers and other companies linked to securities trading in Hong Kong.