(Bloomberg) — Chinese stocks listed in Hong Kong rose the most in nearly two years, extending their stimulus-induced euphoria as traders returned from a holiday holiday.
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The Hang Seng China Enterprises Index climbed as much as 8.4%, extending its winning streak to 13 days. Property developers led the way, rising as much as 31%, a record intraday gain, while an index of estate agent shares – seen as a barometer of risk sentiment – rose 28%. Markets in mainland China will remain closed until October 8 for a week-long holiday.
The prolonged rally is driven by optimism about China’s economy and risk assets after authorities last week unveiled a raft of stimulus measures, including interest rate cuts, freeing up cash for banks and liquidity support for stocks. Four major cities also eased restrictions on home buying and the central bank moved to lower mortgage rates.
The gains “reflect a fundamental shift in investor positioning as previously underexposed hedge funds and mutual funds now focus on Chinese assets,” said Billy Leung, investment strategist at Global X Management in Sydney. “These moves are supported by a broader turnaround in key markets such as copper and Asia-Pacific currencies, driven by renewed optimism about China’s growth.”
The attractive valuations of Chinese stocks after a three-year decline are helping to lure investors.
Even with the recent rise, the Hang Seng China Enterprises Index is still below nine times estimated earnings for the next 12 months, less than half that of the S&P 500, data compiled by Bloomberg show.
Hedge funds
In another sign of rising investor interest, hedge funds are piling into Chinese stocks at a record pace.
Billionaire investor David Tepper is buying more of “everything” related to China, while the world’s largest money manager, BlackRock Inc., is now overweight Chinese stocks. US-based Mount Lucas Management has taken bullish positions on Chinese exchange-traded funds, while Singapore’s GAO Capital and South Korea’s Timefolio Asset Management are buying large-cap Chinese stocks.
“I still remain optimistic, and if subsequent policy can exceed expectations, I think the bull market could last three months to half a year,” said Bo Pei, equity research analyst at US Tiger Securities. “A correction to such a sharp increase is not unusual. What is important is whether interest rates can continue to rise after the correction. Personally, I have every confidence in it.”
Weight regained
The rally was so powerful that in just eight days China regained the weighting in emerging market indexes it had lost over the past 10 months.
The country’s weighting in the MSCI Inc. benchmark for developing-world stocks rose to 27.8% at the end of September, the highest since November 2023, according to data compiled by Bloomberg from the gauge’s shares listed on the mainland, Hong Kong and beyond. markets.
“We are becoming more positive on China’s economic prospects,” Sylvia Sheng, global multi-asset strategist at JP Morgan Asset Management, wrote in a client note. “Positive signals from the Chinese government and regulators, and their increased focus on supporting economic growth and stabilizing the real estate sector, should help put a floor on market prices and boost equity market momentum.”
–With help from John Cheng.
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