“No bailout funds exit” remark boosts HK stocks

(CHINA DAILY)HongKongstocksralliedonMondayonthebackofsharpgainsontheChinesemainlandasinvestorstookheartfromremarksbythesecuritiesregulator’schiefthatgovernmentbailoutfundswouldnotbewithdrawnforthetimebeing.

Marketanalystssaidtheyexpectthepositivemoodtostay,butdoubtedtherewouldbebullmarketamidtheeconomicuncertainties.

HongKong’sbenchmarkHangSengIndex(HSI)jumped1.17percent,or235.74points,tocloseabovethe20,000psychologicalbarrieragainat20,435.34.Thesurgewasledbydevelopers,withtheHSIPropertiessub-indexrocketing2.41percentto28,765.22points.

LiuShiyu,thenewlyappointedchairmanoftheChinaSecuritiesRegulatoryCommission(CSRC),saidonSaturdaytheauthoritiesweredeterminedtopushforwardtheIPO-registrationreform,only“overalongterm”.

Healsosaiditwas“tooearlytotalkabout”anexitbyChinaSecuritiesFinanceCorp—the“nationalteam”thatrescuedthemainlandmarketfromcollapseinthesecondhalfoflastyear.

LiualsosaidtheanticipatedShenzhen-HongKongStockConnect—thesecondstocks“throughtrain”betweentheSARandthemainland—willtakeoffthisyear“forsure”.

TheHSIhasgainednearly8.2percentor,morethan1,546points,sinceFeb25thisyear.TheShanghaiCompositeIndexpickedup1.75percentonMondaytocloseat2,859.5,afterhavinggainedalmost8percentor,over211points,sofarthismonth.

“Webelievethemarketrallywillstayonforlonger.But,goingforward,there’snotlikelytobefurthersignificantgainsasthereboundisnotfundamentalsdriven.Investorsshouldstayawayfromthematerialnamesandothercyclicalpicks,”saidLuWenjie,anH-sharestrategistatUBSSecurities.

Hedescribedthisyear’srallyasrather“valuationreparation”afterthemarketwasoversoldlastyear.AlthoughdataforJanuaryandFebruaryshowthatthemainland’seconomyisstabilizingwiththeauthoritiesgivingoutpositivemessagesthroughaccommodativefiscalandmonetarypolicies,it’sstillnotclearwhetheranewroundofgrowthandinvestmenthasstartedinthecountry.

“Propertysalesintop-tiercitieswerestrongrecently,butit’sleverage-driven,andwedoubthowreliablesuchdemandwouldbe,”Lusaid.“Theauthoritieshavemadeprogressonsupply-sidereform.But,thekeyquestionremainsastohowtoconsumethebadloansofthosefactoriesshuttingdown.”

Headdedthattherallyisalsoa“monetaryphenomenon”duetospeedyM2growthandtightenedcontroloncapitaloutflow.“Butexcessiveliquidityhasitsdownsides—anassetsbubble,forexample.”

However,hebelievesit’sstilltimetobuycertainHshares,preferablyinthelifeinsurance,railwayandpropertysectors,giventhatvaluationofthemarketisstill“reasonable”withtheprice-to-earningsratioofMSCIChinastayingataround9.8times.“Itmaybetimetosellwhenitgoesabove11times,aswedon’tseethemomentumforfurthergain.”

LusaidwhentheShenzhen-HongKongstockslinkstartsrunning,itshouldbenefitHongKong-listed“smallandmid-capgrowthstocks”.

“Mainlandinvestorsareincreasinglyenthusiasticaboutoverseasassets,favoringsmallcaps,especiallyintheITandconsumptionsectors,”hesaid.