After taking a breather on Tuesday, the Hong Kong stock market rally gathered momentum on Wednesday, pushing the benchmark index to a new high since November 2015.

As expected, leading the charge were banks and properties. The indexes for the financial and property sectors had outperformed the main indicator by a significant margin.

The latest rally, which took off on July 11, has many stock analysts and investors wondering what the market is trying to foretell. The local bourse is dominated by institutional investors. For that reason, it's widely seen as a reasonably reliable indicator of the state of the economy for the coming six months.

Some stock analysts have said they're confident that the market upswing would ride on the economy's sustained recovery for the rest of 2016. They said their prognosis is based largely on the strong economic performance in the United States, underlined by increased consumer spending and a persistently low unemployment rate.

Rising consumer demand in the US - one of Hong Kong's largest markets - can help lift exports, a major component of the SAR's economic output. Meanwhile, there're clear signs of a property market recovery, held up by rising prices and higher turnover.

A robust property sector is key to a bullish stock market, where most of the major listed companies are directly or indirectly involved in property development and investment. This is particular true for the banking sector as many local banks derive a substantial portion of their profits from real estate financing and mortgage loans.

On the interest-rate front, the latest predictions are that the strong US economic performance will prompt the Federal Reserve to raise rates in September, rather than putting it off until next year as earlier expected.

But the inflow of capital, or hot money, from neighboring economies is likely to help keep the local currency's exchange rate stable against the appreciating US dollar.

As such, currency traders see no urgency for Hong Kong to follow the US in raising interest rates if and when it does, in order to maintain the linked exchange-rate arrangement.

The global economy is still beset by a host of problems, compounded by Britain's exit from the European Union. But the market seems to be telling Hong Kong that things really don't look as grim as many had thought.

(HK Edition 07/21/2016 page8)