Euphoria continued on the Hong Kong Stock Exchange this Wednesday. The Hang Seng Index closed up by 6.20%, or 1,310.05 points, reaching 22,443.73. This 22,000 points level had not been breached since February 2023.
Particularly notable were the shares of multiple real estate developers, such as Sunac and Kaisa, which surged by more than 40%, while those of Agile skyrocketed over 160%. Tech companies also experienced significant gains.
The Hang Seng Index continued its upward trend that began on Monday following last week’s announcement of stimulus measures by the Chinese government aimed at boosting the economy and real estate sector. It concluded the first day of the week with an increase of 2.43%. The Hong Kong financial center was closed this Tuesday in observance of Chinese National Day. Similar improvements were noted on the Shanghai and Shenzhen exchanges, which closed on Monday with gains of 8.1% and 11% respectively. However, they remain closed since Tuesday due to a public holiday in mainland China.
To recap, China announced last Friday a reduction in the required reserve ratio for banks, aimed at injecting approximately 127 billion euros of liquidity into the financial markets. Additionally, several major cities announced on Sunday the lifting of certain local restrictions that were seen as barriers to property purchases to revitalize the struggling housing and construction sector.
Luxury Sector Rides the Wave
Particularly sensitive to Chinese demand, the luxury sector is also reaping the benefits of the country’s economic recovery measures. On the Paris Stock Exchange this Wednesday around 10:00 a.m. (8:00 GMT), LVMH increased by 1.30% to 672.60 euros, Hermès rose by 1.86% to 2,187 euros, and Christian Dior gained 2.42% to 636 euros.
Consequently, the CAC 40, the leading index on the Parisian market, advanced by 0.63% around 10:30 a.m., or 48.52 points, to 7,622.59 points. This was in contrast to the previous day when it fell by 0.81%, settling at 7,574.07 points, affected by increased tensions in the Middle East.
“Investors (are) choosing to focus on the remarkable rise of the Hong Kong index (…) rather than the geopolitical tensions in the Middle East,” suggests John Plassard, Mirabaud analyst.
Stock Markets Remain Cautious
This cautious sentiment is echoed on the international stage, where investors are torn between optimism and scrutiny this Wednesday. The markets seem pleased with China’s recovery measures but remain vigilant about the reemergence of geopolitical risks in the Middle East.
In Europe, other stock markets opened with slight gains or remained nearly stable this Wednesday. The London Stock Exchange increased by 0.49% at 7:50 a.m., Milan advanced by 0.18%, and the Frankfurt DAX rose by 0.11%.
In contrast, Tokyo’s flagship Nikkei index experienced a drop of 2.18% at the same time, following the previous day’s decline in the American markets. Similarly, Wall Street fell on Tuesday, although New York markets recovered somewhat by the end of the session, limiting their losses; the Dow Jones ultimately lost 0.41%, the broader S&P 500 index fell by 0.93%, and Nasdaq decreased by 1.53%.
“Investors are (trying) to ascertain whether this regional conflict could expand throughout the Middle East,” explains Jim Reid, economist at Deutsche Bank. “There are signs suggesting that the risks of escalation may be higher this time,” he notes.
In light of the uncertainty arising from geopolitical risk, there is a growing aversion to risky assets like stocks, prompting investors to shift towards bonds, which are viewed as safer alternatives. In the bond market, the yield on 10-year US government bonds was 3.75%, slightly up from 3.73% at Tuesday’s close.
(With AFP)
Hong Kong Stock Exchange Euphoria: Hang Seng Index Surges Amid Economic Recovery
The euphoria continued this Wednesday on the Hong Kong Stock Exchange. The Hang Seng Index closed up +6.20%, or 1,310.05 points, reaching 22,443.73. This threshold of 22,000 points had not been crossed since February 2023.
Real Estate Developers Lead the Charge
Real estate stocks were the standout performers, with notable increases in share prices. For instance, Sunac and Kaisa saw their shares jump by more than 40%, while Agile skyrocketed by over 160%. Tech companies mirrored this upward trend, contributing positively to the market sentiment.
Chinese Government Stimulus Measures
The Hang Seng Index’s rise, which began on Monday, follows the announcement of significant stimulus measures by the Chinese government aimed at revitalizing the economy and the real estate sector. It marked an increase of +2.43% on the first trading day of the week, with the Hong Kong market remaining closed on Tuesday due to Chinese National Day. The positive sentiment also resonated in Shanghai and Shenzhen, with gains of +8.1% and +11%, respectively, before their closure for the public holiday.
Key Economic Measures
China’s decision last Friday to reduce the required reserve ratio for banks is significant, as it is expected to inject approximately 127 billion euros of liquidity into the financial markets. Furthermore, several major cities lifted local restrictions seen as barriers to property purchases, further propelling market optimism.
Impact on the Luxury Sector
Particularly exposed to Chinese demand, the luxury sector is also experiencing benefits from these economic recovery measures. On the Paris Stock Exchange, luxury giants performed well, with:
- LVMH: +1.30% to €672.60
- Hermès: +1.86% to €2,187
- Christian Dior: +2.42% to €636
Global Market Response
The CAC 40, France’s premier index, reflected this positive sentiment with an increase of +0.63%, adding +48.52 points to reach 7,622.59. This upward movement contrasts with the previous day’s fall of -0.81%, driven by escalating geopolitical tensions in the Middle East.
“Investors prefer to focus on the spectacular rise in the Hong Kong index (…) rather than on geopolitical tensions in the Middle East,” states John Plassard, a Mirabaud analyst.
Market Sentiment: Cautiously Optimistic
A global perspective reveals that investors are balancing optimism with caution. Stock markets globally are reacting positively to China’s recovery measures yet are cautious of escalating geopolitical risks in the Middle East.
European Market Performance
European stock markets opened with slight increases or stability. Key movements included:
- London Stock Exchange: +0.49%
- Milan: +0.18%
- Frankfurt Dax: +0.11%
Tokyo and U.S. Market Trends
In contrast, the Tokyo Nikkei index fell by -2.18%, influenced by declines in American markets from the previous day. On Wall Street, declines were evident with:
- Dow Jones: -0.41%
- S&P 500: -0.93%
- Nasdaq: -1.53%
“Investors are trying to understand whether this regional conflict could spread across the entire Middle East,” explains Jim Reid, an economist at Deutsche Bank, highlighting the escalating risks of the geopolitical situation.
Shifts in Investor Preferences
Given the geopolitical uncertainties, many investors have shown a preference for safe-haven assets like government bonds rather than stocks. As a result, the yield on 10-year US government bonds increased to 3.75%, up from the previous day’s close of 3.73%.
Implications for Future Investments
As global markets respond to the mix of positive economic stimuli from China and geopolitical tensions, it will be critical for investors to monitor these trends carefully. Key takeaways include:
- Understanding the impact of China’s real estate recovery on global markets.
- Keeping tabs on luxury sector performance, particularly in response to Chinese consumer demand.
- Balancing investments between riskier stock assets and safer bonds amid geopolitical uncertainties.
(With AFP)
