HONG KONG: Hong Kong shares headed for fresh three-month highs on Thursday as cheap valuations and optimism over inflows from the mainland spurred Chinese companies, with property developers leading the charge for a second day. The Hang Seng Index climbed 0.4% to 23,575.91 by noon. China Resources Land climbed 4.8% to extend Wednesday’s 7% jump, while China Overseas Land & Investment added 1.9%. The Hang Seng China Enterprises Index of large mainland companies, also known as the H-share index, advanced 1.3% to 10,085.88 as it headed for its highest close since November 2015. Turnover on the stock exchange’s main board jumped to more than HK$57 billion ($7.3 billion).
Tsingtao Brewery jumped 4.8% after Bloomberg News reported, citing people familiar with the matter, Denmark’s Carlsberg was working on a potential bid for Asahi Group Holdings’ 20% stake in the company. Mainland developers have been spurred after Morgan Stanley upgraded its outlook on the sector and on speculation that stepped up efforts by Chinese authorities to deflate asset bubbles won’t hurt prices and property sales. While cheap valuations of mainland companies traded in the city lured buyers, some questioned whether the optimism is well placed.
“While positive recent brokerage reports, valuations and sales numbers are helping a rally in China developers, I am not sure this rally is sustainable as the threat of additional government measures to contain prices will remain an overhang,” said Ronald Wan, chief executive at Partners Capital International. “The overall positive trend in Hong Kong is being helped by hopes that pension funds will be allowed to invest in equity markets.” The H-share index currently trades at 8.5 times its earnings, compared with 12.7 times for the Hang Seng Index and 14.5 times for the Shanghai Composite Index. The S&P 500 Index is valued at a multiple of 20.6. Mainland companies traded in China typically trade at premium valuations to their Hong Kong-listed counterparts.
In mainland markets, the Shanghai Composite Index rose 0.4% and the Shenzhen Composite Index climbed 0.5%. The onshore traded yuan was little changed at 6.8675 against the dollar. The Nikkei Asia300 Index advanced 0.5% to 1,112.21. Casino stocks staged a rebound Thursday after a string of recent declines in the wake of downbeat data on growth in Macau gaming revenues last month. Galaxy Entertainment Group jumped 2.5% and Sands China added 1%. Heavyweight stock HSBC Holdings slipped 0.8% as a decline in U.S. bond yields weighed on global financials.
