For some market analysts, it is foolish to even suggest the current bull run is a fool’s rally. The global rally that has lifted stock markets from Hong Kong to Hungary is not a mere dead cat bounce, they say, and will only fuel further gains in the coming months.
In past weeks, investors have been piling back into stocks amid a growing optimism that the worst may now be over. Main board trading turnover in Hong Kong has topped HK$70 billion five times this month already after doing so only once in the previous five months.
“Funds are flowing into the Hong Kong stock market to chase stocks,” Ben Kwong Man-bun, the chief operating officer at KGI Asia, said. “And people are saying the bears are history and the bulls are coming. The bulls aren’t coming, they’re already here.”
The Hang Seng Index climbed 4.70 per cent last week, extending its advance to a sixth-straight week, a scenario unthinkable even a few weeks ago. Over this period, the benchmark has surged 30.87 per cent and the H-share index 33.41 per cent.
After a dismal performance last year, markets across the border also seem to be on a comeback trail. The Shanghai Composite Index has risen 37.52 per cent so far this year.
“The China market is starting its bull run and [there is hope] it will be followed by other Asian markets,” Francis Lun Sheung-nim, a general manager at Fulbright Securities, said.
Investors are speculating the mainland economy may have turned the corner after industrial production and retail sales were better than expected last month. Recent stimulus measures may accelerate the recovery process, says Mark Mobius, executive chairman at Templeton Asset Management.
“The longer-term outlook for emerging markets remains positive due to their relatively strong fundamentals and faster growth than their developed counterparts,” Mr. Mobius wrote in a recent report.
The market rally also seems to be starting to factor in a recovery in overseas economies and analysts say stocks can climb even higher if leading indicators like home sales and durable goods orders confirm signs of a turnaround.
“Markets usually lead the economic cycle by about half a year. The market is moving steadily higher now, which means the economy is going to see a recovery towards the end of this year,” Alex Tang Yee-yuk, a research director at Core PacificYamaichi International, said.
“If that is the case, all [stock] indices should go up substantially from their lows.”
Apart from harbouring hopes of a global recovery, Hong Kong investors are also banking on an improvement in the global financial system. Markets rose sharply last week after Goldman Sachs and JP Morgan announced strong first-quarter earnings and said they were prepared to return some of their government financing.
“This is telling us they are confident the worst is over and are able to weather the storm themselves,” Mr. Tang said.
KGI’s Mr. Kwong last week said he was sceptical of the Hang Seng Index moving above 16,000 in the near term. But he said the market might consolidate next month as it would find technical support, adding the index had already crossed many resistance levels over the course of the current rally.
The benchmark failed to break through the 16,000-point ceiling last week but managed its largest weekly gain of the month as investors snapped up recovery themed stocks like telecoms and electronics manufacturers.
“And they have been selling utilities counters,” Mr. Tang said. “This is a clear sign that they don’t think the market is peaking.”
1 comment:
Is this stock rally for real?
Market analysts are split down the middle
Nick Westra
19 April 2009
For some market analysts, it is foolish to even suggest the current bull run is a fool’s rally. The global rally that has lifted stock markets from Hong Kong to Hungary is not a mere dead cat bounce, they say, and will only fuel further gains in the coming months.
In past weeks, investors have been piling back into stocks amid a growing optimism that the worst may now be over. Main board trading turnover in Hong Kong has topped HK$70 billion five times this month already after doing so only once in the previous five months.
“Funds are flowing into the Hong Kong stock market to chase stocks,” Ben Kwong Man-bun, the chief operating officer at KGI Asia, said. “And people are saying the bears are history and the bulls are coming. The bulls aren’t coming, they’re already here.”
The Hang Seng Index climbed 4.70 per cent last week, extending its advance to a sixth-straight week, a scenario unthinkable even a few weeks ago. Over this period, the benchmark has surged 30.87 per cent and the H-share index 33.41 per cent.
After a dismal performance last year, markets across the border also seem to be on a comeback trail. The Shanghai Composite Index has risen 37.52 per cent so far this year.
“The China market is starting its bull run and [there is hope] it will be followed by other Asian markets,” Francis Lun Sheung-nim, a general manager at Fulbright Securities, said.
Investors are speculating the mainland economy may have turned the corner after industrial production and retail sales were better than expected last month. Recent stimulus measures may accelerate the recovery process, says Mark Mobius, executive chairman at Templeton Asset Management.
“The longer-term outlook for emerging markets remains positive due to their relatively strong fundamentals and faster growth than their developed counterparts,” Mr. Mobius wrote in a recent report.
The market rally also seems to be starting to factor in a recovery in overseas economies and analysts say stocks can climb even higher if leading indicators like home sales and durable goods orders confirm signs of a turnaround.
“Markets usually lead the economic cycle by about half a year. The market is moving steadily higher now, which means the economy is going to see a recovery towards the end of this year,” Alex Tang Yee-yuk, a research director at Core PacificYamaichi International, said.
“If that is the case, all [stock] indices should go up substantially from their lows.”
Apart from harbouring hopes of a global recovery, Hong Kong investors are also banking on an improvement in the global financial system. Markets rose sharply last week after Goldman Sachs and JP Morgan announced strong first-quarter earnings and said they were prepared to return some of their government financing.
“This is telling us they are confident the worst is over and are able to weather the storm themselves,” Mr. Tang said.
KGI’s Mr. Kwong last week said he was sceptical of the Hang Seng Index moving above 16,000 in the near term. But he said the market might consolidate next month as it would find technical support, adding the index had already crossed many resistance levels over the course of the current rally.
The benchmark failed to break through the 16,000-point ceiling last week but managed its largest weekly gain of the month as investors snapped up recovery themed stocks like telecoms and electronics manufacturers.
“And they have been selling utilities counters,” Mr. Tang said. “This is a clear sign that they don’t think the market is peaking.”
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