HK stocks party like mainland peers

Editorial | Mary Ma 7 Jul 2020

Officially, the bull market is back for the Hang Seng Index. With the index standing more than 20 percent above the lows in March, yesterday's turnover of HK$250 billion was also the most voluminous since March 2018.

The surge was primarily driven by a strong performance in the mainland's A-share market where daily tradings in Shanghai and Shenzhen combined exceeded 1.5 trillion yuan - the highest in almost five years.

It was the third consecutive day that the volume had remained firmly above 1 trillion yuan.

It was incredible. Beijing seemed to be asserting to the world that everything was okay with its economy despite the coronavirus pandemic, mounting unemployment, increased conflicts with America, severe flooding across a vast territory and the premier's warning about the economy.

Of course, there's also the passage of the national security law for Hong Kong.

Compared to its peers elsewhere, the rebound of the Hong Kong market has been slow. If trading has been focused on a few stocks - most notably the "ATM" trio of Alibaba, Tencent and Meituan - since the announcement of the national security law, yesterday's surge was across the board with capital flowing into the old economy.

Believe it or not, even Hongkongers' one-time pride, HSBC, had a rally of nearly 5 percent.

Of course, the stock exchange has been the sure winner along with the ATM since it is the only platform through which Hong Kong-listed stocks are traded. It is estimated that the bourse and Tencent alone accounted for about 40 percent of the index growth of the past three months.

It is natural for capital to flow from expensive stocks to cheaper alternatives.

The ongoing enthusiasm bears some resemblance to the 2015 stock party, fueled by state media reports of a "bull market comeback" and the need to cultivate "a healthy bull."

There was also the earlier move by regulators in Beijing to loosen rules on margin financing, which was viewed by market players as a government signal to guide funding from banks and insurers to the stock market.

Will history repeat itself readily? Maybe, maybe not since even Warren Buffett appeared to have lost his step too. Soon after Wall Street tumbled as infection cases rose violently in the US a few months ago, Buffett exclaimed that stocks then were still too expensive to buy after he exchanged a good lot for cash.

Stocks have not got cheaper, but he has now pulled the trigger with a US$10 billion deal to buy the natural gas transmission and storage assets of an energy firm.

The Oracle of Omaha may not be convinced that the worst is over, but he knows he must answer his fans' queries.

Interestingly, tens of thousands of Hongkongers received HK$10,000 from the government yesterday. How much of that finished up as part of the HK$250 billion poured into the stock market the same day? It would be interesting to find out.

The security law has been a dampening factor. However, as the threat of sanctions failed to materialize as predicted, investors lowered their guard and joined the party.

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