HSI surges 2.5% on European bailout
Updated: 2010-05-11 07:37
(HK Edition)
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Hong Kong stocks surged over 2.5 percent Monday, ending a five-day losing streak, after European policy makers and the International Monetary Fund (IMF) put together a 750 billion bailout package to solve the debt crisis in the region.
The Hang Seng Index advanced 506.35 points to close at 20,426.64, reversing the 5.6 percent slump last week. That was the gauge's biggest weekly drop since the five days ended November 27.
"The fact that European leaders have met over the weekend shows that it's not just the amount of the rescue that they have come up with, but the sense of urgency that they're are displaying, that shows a new unity that wasn't to be found about, say, two months ago," Tan Teng Boo, who oversees $300 million as managing director at iCapital Global Fund, told Bloomberg.
The Hang Seng China Enterprises Index, which tracks the so-called H-shares of Hong Kong-listed mainland companies, rose nearly 3 percent, or 337.76 points, to close at 11,717.32, its biggest jump since March 1.
Shares on the benchmark Hang Seng Index are priced at an average 13.5 times estimated earnings, down from 18 times on November 16, when the index closed at its highest level for 2009, according to Bloomberg data.
Concern over budget deficits in Europe and speculation Beijing will tighten the money supply have contributed to an 11 percent drop in the Hang Seng from its November high. The measure's 14-day relative strength index fell to 30 on May 7, a level some investors use as a signal to buy. Export-related stocks outperformed, with port operator Cosco Pacific climbing 5.5 percent to HK$9.94.
Li & Fung, the biggest supplier for retailers such as Walmart Stores Inc, advanced 4.1 percent to HK$37.25. Esprit Holdings Ltd, which received 85 percent of its fiscal 2009 revenue from Europe, gained 3.7 percent to HK$51.50.
European policy makers unveiled an unprecedented loan package worth almost $1 trillion and a program of bond purchases to stop a sovereign-debt crisis. Governments of the 16 euro nations agreed to offer loans of as much as 750 billion euros to countries under attack from speculators. The European Central Bank will counter "severe tensions" in "certain" markets by purchasing government and private debt.
HSBC surged 5.6 percent to HK$77.70, the sharpest rally on the Hang Seng Index, after saying first-quarter earnings beat the same period in 2009 and as the US unit posted its first profit in three years.
Bloomberg News - China Daily
(HK Edition 05/11/2010 page2)