Don't leave yet - the party's still in full swing

Business | Feb 16, 2017
When the US Federal Reserve started increasing interest rates, many investors were worried that a higher interest rate environment would hurt the stock market for two reasons.

First, higher interest rates could attract investors' money back to the banks. Second, higher interest rates would raise borrowing costs for business enterprises, and therefore hurt the economy.

But Dr Check has explained here that when interest rates can be raised, it means that the economy is starting to recover with higher inflation. Corporate earnings should improve and support higher stock valuations. When the interest rate hike cycle starts, stock market performance is usually good.

Following Wall Street's overnight strength, the Hang Seng index gained 291 points to 23,994 yesterday.

The accumulated gain since 18,278, the low in February 2016, has been 31.2 percent. The index might soon test 24,364, the 52-week high in September 2016.

Rotational buying spread to PRC banks, nuclear power plant builders, Apple related shares and the clean energy sector.

China Construction Bank (939) gained 5 percent to a 18-month high. Shanghai Electric (2727) went up 7.7 percent. Sunny Optical (2382) rose 6.1 percent to an all-time high.

So let's face the reality. Money has kept flowing into Hong Kong. Rotational buying spread to smaller sectors. Do not leave the party at this moment.

Dr Check and/or The Standard bear no responsibility for any decision made base on this column.



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