MSCI Hong Kong Enters Bull Market as Property Shares Advance

  • Investors buying stocks that dropped too much: Baring Asset
  • Casino operators lead rebound on Macau revenue optimism

MSCI Inc.’s measure of Hong Kong stocks entered a bull market, with property developers and casinos leading a rally from a three-year low reached in January.

The MSCI Hong Kong Index advanced 1.1 percent at the close on Wednesday, 21 percent above the closing level on Jan. 21, when it dropped to the lowest level since September 2012. Casino operator Wynn Macau Ltd. jumped 76 percent during the period, leading gains amid speculation industry revenue will improve. Sino Land Co. and New World Development Co. rallied at least 38 percent on optimism the Federal Reserve will hold off on raising interest rates this year.

“Investors are buying stocks that have been sold down too much, and as a result some of the very cheap stocks started to recover quite strongly," said Khiem Do, the head of multi-asset strategy at Baring Asset Management (Asia) Ltd. “We are still lagging the world, especially the U.S. If we see more easing in monetary policy in China, it would help sentiment."

The rebound was aided by a record run for U.S. equities, while the U.K.’s vote to leave the European Union helped damp forecasts for an increase in Fed borrowing costs this year. Property companies in Hong Kong, where interest rates move in tandem with the U.S., stand to gain from lower rates. Casino operators advanced on expectations investments in new Macau resorts will help draw more tourists after gaming revenue slumped for 25 straight months.

The 44-member MSCI Hong Kong Index rose to 12,592.03. Hong Kong’s benchmark Hang Seng Index added 1 percent, less than 0.5 percent away from a 20 percent increase from its Feb. 12 low. The S&P 500 Index on Monday closed at an all-time high, with the measure up 5.9 percent this year. The MSCI Hong Kong Index has gained 4.2 percent in 2016.

Sino Land and New World tumbled more than 25 percent over three months through their lows in 2016, dragging their price-earnings multiples to the lowest in more than a year. Sino Land now trades at 9 times reported earnings and New World at 4 times, far below MSCI Hong Kong’s average of 13 times, according to data compiled by Bloomberg.

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