Hang Seng Index soars 537 points in biggest 6-week increase on US economy hopes

Hong Kong's stocks jumped the most in six weeks on Wednesday, as a surge in US homes sales heightened speculation that the world's largest economy can withstand higher interest rates.

Riding on the back of rallies on US, European and Asian markets, the Hang Seng Index (HSI) surged 2.71 percent, or 537 points, to close at 20,368.05.

The advance was led by heavyweight blue chip stocks with a turnover of HK$62 billion after trading values fell to their lowest levels this year on Monday.

PetroChina Co - the nation's biggest energy producer - headed for its steepest rise since mid-April as oil approached $50 a barrel. Billionaire Li Ka-shing's Cheung Kong Property Holdings rose by the most in two months.

Hong Kong stocks joined a global and regional rally after US equities climbed on Tuesday amid speculation that the US economy can tolerate higher borrowing costs as odds of the US Federal Reserve tightening policy this summer increase.

But, whether shares can sustain the rebound amid concerns over another possible US interest-rate hike next month, as well as slowing mainland economic growth, will depend on turnover, according to research and investment company Partners Capital International in Hong Kong.

Wednesday's stocks surge was driven by short covering after new homes sales in the US greatly exceeded estimates, said Hong Hao, chief China strategist at BOCOM International Holdings in Hong Kong.

"The rebound, fueled by short covering, is hardly a turnaround with a lack of improvement in fundamentals," he said.

Patrick Shum Hing-hung, an investment manager at Tengard Fund Management, said whether the rebound can be sustained would depend on how the market interprets the US data. "Long-term investors can consider purchasing Hong Kong shares after the US Federal Reserve had come up with a decision on interest rates at its coming meeting in June, and whether the UK will agree to leave the European Union in a referendum next month," Shum told China Daily.

The Hang Seng Index has slipped 7.2 percent so far this year amid a string of negative news. The Chinese mainland's economic slowdown is affecting everything from trade to retail sales, while Goldman Sachs Group expects local property prices to tumble another 20 percent.

Bloomberg contributed to the story.

oswald@chinadailyhk.com

Experts say that whether the rebound can be sustained would depend on how the market interprets the US data. Parker Zheng / China Daily

(HK Edition 05/26/2016 page11)