Hong Kong stocks climbed to the highest level since December 2007 as volatility surged and an unexpected drop in Chinese exports spurred speculation that authorities will increase stimulus to support economic growth.
Hong Kong Exchanges & Clearing Ltd. jumped 19 percent as Goldman Sachs Group Inc. raised its target price. China Merchants Bank Co. climbed by a record in Hong Kong after announcing plans to sell shares. Almost all foreign-currency B shares traded on mainland exchanges gained by the 10 percent daily limit. Data Monday showed overseas shipments fell 14.6 percent in March in yuan value, while imports also slumped.
The Hang Seng Index rose 2.7 percent to 28,016.34 at the close in Hong Kong. The benchmark gauge has climbed 14 percent in an eight-day rally after mainland authorities made it easier for domestic funds to use the cross-border bourse link. The Hang Seng China Enterprises Index of Chinese stocks traded in the city advanced 4.3 percent, while the Shanghai Composite Index climbed 2.2 percent.
“The investor in Shanghai is realizing that there is a better risk-return opportunity on offer in Hong Kong,” Jonathan Garner, Hong Kong-based chief strategist for Asia and emerging markets at Morgan Stanley, said in a phone interview. “We now see a greater likelihood of the Hang Seng’s valuation converging with its own long run average. The catalyst is the inflow from the Shanghai investor via the connect program.”
The HSI Volatility Index jumped 12 percent to its highest level since June 2012, while the Hang Seng measure’s relative strength index rose to 89.4, the highest since February 1989. The Shanghai Composite’s RSI was above 70 Monday for the 19th straight day. Levels above 70 signal to some traders that gains have gone too far, too fast.
Hong Kong Exchanges rose to HK$297.4. Goldman Sachs raised the stock’s price target to HK$355, lifting for a second time in less than a week. The stock trades at 48 times projected 12-month earnings, compared with its five-year average of 28.
China Merchants Bank jumped 25 percent in Hong Kong and by the 10 percent daily limit in Shanghai. The lender will raise as much as 6 billion yuan ($965 million) from employees.
Train makers CSR Corp. and CNR Corp. advanced by maximum allowed in Shanghai, leading gains by industrial shares.
Gross domestic product data scheduled for Wednesday will probably show the economy expanded 7 percent in the first quarter from a year earlier, according to a separate survey. That would be the slowest pace since the first quarter of 2009, when China was hit by the global financial crisis.
The slump in exports compared with the median estimate for an 8.2 percent rise in a Bloomberg News survey of analysts. Imports slid 12.3 percent, leaving a trade surplus of 18.16 billion yuan.
The CSI 300 Index rose 1.8 percent. Shanghai’s B-share index surged 9 percent, capping its biggest two-day gain since 2006.
B shares are “very much undervalued,” said Louis Tse, a Hong Kong-based director at VC Brokerage Ltd.
Foreign-currency shares of Jinzhou Port Co. and Huadian Energy Co. surged 10 percent in Shanghai. The city’s B-share index rose 19 percent in the six months through Thursday, trailing the 66 percent gain for the A-share measure.
Hong Kong retailers declined after China limited visitors to the city. Sa Sa International Holdings Ltd. fell 6.2 percent. Chow Tai Fook Jewellery Group Ltd. slid 2.9 percent.
Residents from Shenzhen will be allowed one trip per week to neighboring Hong Kong as of today, the Xinhua News Agency said Monday, citing China’s Ministry of Public Security. Visitors from the mainland city didn’t face limits previously.
The Shanghai Composite is valued at 15.8 times 12-month projected earnings, the highest since April 2010, according to data compiled by Bloomberg. Trading volumes were 32 percent above the 30-day average Monday, according to data compiled by Bloomberg.
Margin traders increased holdings of shares purchased with borrowed money on Friday, with the outstanding balance of margin debt on the Shanghai Stock Exchange rising by 1.3 percent to 1.09 trillion yuan.
— With assistance by Shidong Zhang, and Adam Haigh