Bubble worries as Hong Kong shares soar
Hong Kong, June 3, 2009 (AFP NEWS) -
A surge of foreign money spurred by a bullish view of China's economy has fired
Hong Kong shares more than 60 percent higher since March, but doubts are
growing over how long the rise can go on.
Against a dire global economic background, the city has thrived from a belief
among international investors that China, buoyed by a four trillion yuan (586
billion US) stimulus package, was the safest bet around.
And on Monday the Hang Seng Index of blue chip stocks finished at 18,888.59
points, soaring 66 percent from its 2009 low of 11,344.58 hit on March 9.
"China has been the only good news story out there," said Tim Rocks, an analyst
with Macquarie Bank in Hong Kong.
Hong Kong, a southern Chinese financial hub where many mainland firms are
listed, has its own legal system and is the only market in China fully open to
international investors.
Rocks said the jump in Taiwan's stock market -- more than 50 percent since
March 9 on the back of improved political and trade ties with the mainland --
showed the appetite to capitalise on China's perceived economic strength.
The Hang Seng hit its lowest point when worries about the capital position of
banking giant HSBC, a crucial market bellwether, were at their most acute.
The bank dropped 24 percent on March 9 to 33.00 dollars. It closed Tuesday at
68.05, a rise of more than 100 percent.
Howard Gorges, vice chairman of South China Securities, said the shift away
from gloom was "like the blue sky opening" for investors who were brave enough
to take the plunge.
"It has been extraordinary... Later, you had a lot of investors who realised
they had not benefited as much as they might have from the initial rise so
(they later moved in) which has kept pushing it higher."
The market has been able to spin bad news and surge on any positive signs,
Gorges said.
Li and Fung, a trading company that helps foreign firms connect with Chinese
manufacturers, jumped more than 10 percent last Wednesday on strong US consumer
confidence figures.
Francis Lun, a veteran stocks watcher and general manager at Fulbright
Securities, described the surge as "the unbearable lightness of the Hong Kong
market."
"It has defied gravity. Hong Kong's banking system has just been flooded with
cash and most of it has made its way into the stock market."
Lun said the flow of "hot" or international money into Hong Kong has meant the
amount of cash sloshing around the banking system has been five times higher
than normal, and much of it has inevitably headed to the stock market.
Despite the surge, many have warned for weeks that the rise is unsustainable.
Unemployment is at a three-year high, retail sales fell 4.4 percent in April
and exports have dropped 21 percent year-on-year in the first four months of
2009, officials figures show.
"(The rise) is not based on fundamentals at all," said Lun, who said he
expected a sharp correction.
Rocks said China was no longer the only bright light in the global economy.
"Increasingly, it is going to be much harder for the market to keep running,"
he told AFP. Other markets such as Brazil could lure investors away from Hong
Kong, he said.
Hong Kong has a vibrant community of small investors who spend all day perched
in front of screens in public trading rooms, swapping rumours and tips.
And nervousness that a fall is imminent is spreading among them.
"The price now is uncertain, I'm afraid it will fall some day... I'm not buying
anything more now," said Kung Sinu-ning, aged 55, at a small shareholder
trading room in the city's Wanchai district.
And not everyone has benefited from the surge.
"I know I'm losing a lot, but I go on throwing money in," said Lam Kai-chiu, a
61-year-old insurance agent.
"I know there are traps and that we're all being played around with by the
large shareholders, but I just go on buying and selling. It's like an
addiction."
