Hong Kong’s Hang Seng Index capped its longest winning streak since 2010 after the city’s de facto central bank stepped in for the first time since 2009 to prevent the currency from rising against the U.S. dollar as funds flow into the market.
Hong Kong Exchanges & Clearing Ltd., the world’s second-largest bourse operator by market value, advanced 3.5 percent amid optimism the flow of funds into the city will lead to higher turnover. China Mobile Ltd., the world’s biggest phone company by subscribers, gained 1.1 percent after a report the company raised its 2012 profit target. PetroChina Co., Asia’s biggest company by value, fell 1.3 percent after oil prices fell.
The Hang Seng Index rose 0.7 percent to 21,697.55 at the close, its eighth straight day of gains and the longest streak since July 2010. Three stocks climbed for each that dropped on the 49-member index. Volume was 12 percent below the 30-day intraday average. The Hang Seng China Enterprises Index of mainland companies advanced 0.6 percent to 10,742.79.
“There is some hot money coming into Hong Kong on expectation there will be a bottoming out of China’s economy,” said Linus Yip, chief strategist at First Shanghai Securities in Hong Kong. “That would help support the market. It’s only the first sign of hot money going into Hong Kong. There will be more to come. From a technical point of view, the Hang Seng Index is overbought, so maybe it could go into a correction.”
The Hong Kong equity benchmark’s so-called 14-day relative-strength index was at 77 today, the strongest since October 2010 and a level that indicates to some analysts that prices may fall. The gauge rose 2 percent last week, capping its seventh-straight weekly gain, as better-than-expected economic reports from the U.S. and China boosted confidence.
The Hang Seng Composite Index, the city’s broadest measure of stock performance capped its longest streak of advances since January 2010 today. Mainland companies made up 56 percent of Hong Kong’s market capitalization at September 30, bourse operator Hong Kong Exchanges reported.
The Hang Seng Index traded at 11.3 times average estimated earnings at the end of last week, compared with 13.7 for the Standard & Poor’s 500 Index and 12.2 for the Stoxx Europe 600 Index, according to data compiled by Bloomberg.
The cost of options to protect against losses in Chinese stocks fell to the lowest level in six years as investors bet new leaders may do more to encourage growth after a seven-quarter slowdown.
Puts protecting against a 10 percent drop in the Hang Seng China Enterprises Index cost 1.04 times more than calls betting on a 10 percent advance, according to data on one-month options compiled by Bloomberg. The price relationship, known as skew, plunged to 1.01 on Oct. 15, the lowest since March 2006.
Futures on the S&P 500 climbed 0.2 percent today. The gauge fell 1.7 percent on Oct. 19 after Microsoft Corp. and General Electric Co. reported earnings that missed estimates.
The Hong Kong Monetary Authority said it bought $603 million at HK$7.75 per dollar, which is the so-called strong side of the permitted convertibility range of HK$7.75 to HK$7.85 that obligates intervention. The move, announced in an e-mailed statement on Oct. 20, was confirmed by spokeswoman Rhonda Lam, who said the authority acted during New York trading hours.
Hong Kong Exchanges gained 3.5 percent to HK$125.60, the steepest gain in the Hang Seng Index. Weekly turnover on the bourse’s main board rose for a second week on Oct. 19 after four consecutive declines.
“We expect the turnover to increase,” with the so-called “hot money” coming into Hong Kong, said First Shanghai’s Yip. “There will be at least a certain amount going into the Hong Kong stock market, and it will help the market sentiment.”
GCL-Poly Energy Holdings Ltd., a solar-power company, jumped 4.5 percent to HK$1.40, extending last week’s surge. The shares jumped 14 percent in the five days ended Oct. 19 after the Shanghai Securities News reported that China may issue more policies to support the industry.
China Mobile rose 1.1 percent to HK$85.45. The company raised its 2012 profit target by 10 billion yuan ($1.6 billion) at an internal meeting held Oct. 19, Chinese-language news portal Sina.com reported, without citing where it got the information. The company doesn’t give out earnings guidance, spokeswoman Rainie Lei said by phone today.
Among stocks that fell, PetroChina lost 1.3 percent to HK$10.94 after crude oil for November delivery lost 2.2 percent to settle at $90.05 a barrel in New York on Oct. 19.
Futures on the Hang Seng Index rose 0.6 percent to 21,681. The HSI Volatility Index rose 6.7 percent to 15.92. The level indicates traders expect a swing of 4.6 percent for the equity benchmark in the next 30 days.