Hong Kong’s benchmark Hang Seng Index surged more than 7% in April as the best-performing major index in the world. It’s now heading into a bull market, rebounding nearly 20% from its January low.
The rebound marks a sharp turnaround after a weak start to 2024 and years of heavy losses, which saw more than $3 trillion wiped off the value of the city’s stock market as global investors grew increasingly skeptical about China’s economic future and worried about geopolitical tensions with the United States.
But an improving economic landscape in China, cheaper valuations and a flurry of mainland investors putting money into Hong Kong to protect their portfolios from a weakening Chinese currency have combined to resuscitate the market.
“Foreign inflows have started to come back with the bottoming of the [Chinese] economy,” said Kelly Chung, chief investment officer for multi assets at Value Partners, a Hong Kong-based asset management firm.
The valuation of Hong Kong stocks has also become more “compelling” relative to the rest of the Asian region after the pullback last year, said Zhikai Chen, head of Asian equities at BNP Paribas Asset Management. He added that there is a shift in investors’ sentiments as Chinese economic data turned more positive.
In recent days, investors have been getting increasingly upbeat because of reports that Beijing would roll out a “real solution” for the crisis-ridden property sector.
“Attention is squarely on China’s property market, seen as the linchpin of the country’s economic stability,” said Stephen Innes, managing partner at SPI Asset Management.
“Recent policy measures, ranging from lifting restrictions on homebuyers to providing support for developers’ funding needs, underscore the government’s commitment to bolstering this critical sector in 2024,” he said.
There are signs that China’s economy might be bottoming out.
Manufacturing activity grew at the fastest pace in 14 months in April, according to a private survey released on Tuesday.
The Caixin/S&P Global manufacturing PMI rose to 51.4 in April from 51.1 in March, marking the sixth consecutive month of expansion, as new export orders recorded a solid increase because of improving global demand.
In the first quarter, China’s gross domestic product grew 5.3% from a year ago, thanks to robust growth in high-tech manufacturing.
