The benchmark Hang Seng Index that is made up of mostly Chinese-focused stocks rose 2.7% to 25962.88, hitting the highest level since May 2008 and taking gains over the past month to 7.4%. It was reopening after a three-day trading holiday. Funds flowing into Hong Kong from China via a newly-launched trading link surged to a record on Wednesday and neared a daily limit as interest booms in the program.
The sudden interest in Hong Kong is a turnaround for one of Asia's biggest and most-traded markets that had struggled to make gains this year and had been left behind as investors instead piled into Shanghai. But the divergent performance between the two markets has left stocks in Hong Kong far cheaper than shares of the same companies listed in Shanghai and is now attracting investors back.
Still, the frenzy led some fund managers to sound a cautious note about the speed of the gains. They said buyers weren't differentiating between high- and low-quality stocks with the market rallying across the board, said Stephen Ma, a senior portfolio manager at Lloyd George Management.
"It's just buying up everything," he said. "Hopefully it'll return to sanity after 4 p.m.," he said, referring to the closing time of Hong Kong's market.
One of the biggest winners Wednesday was the Hang Seng China Enterprises Index, which tracks Chinese companies trading in Hong Kong, surging 4.3% compared with a more modest 0.6% gain for the Shanghai Composite Index.
Hong Kong-listed stocks are trading at an average discount of 29.3% to equivalent shares trading in Shanghai, according to the Hang Seng China AH Premium Index. The discount was as high as 35% in late March, the steepest rate in almost four years.
Among the shares making the biggest gains were industrial stocks such as China Oilfield Services Ltd., up 18%, and infrastructure companies expected to benefit from Beijing's ambitious infrastructure-investment plans, such as China Communications Construction Company Ltd., up 14.7%. Shares of brokerages Haitong Securities Co., Citic Securities Co. and Hong Kong Exchanges & Clearing Ltd., the city's exchange operator, also rallied sharply on the increased trading volumes.
The turnover on the main board of the Hong Kong Stock Exchange soared too, hitting 132.3 billion Hong Kong dollars (US$17.1 billion) as the market paused for lunch--compared with an average daily turnover of 84.3 billion Hong Kong dollars during the first two months of 2015.
Elsewhere in Asia, the Nikkei Stock Average was also higher by 0.7% at 19782.64. The market awaits the Bank of Japan's announcement on policy, although few expect concrete easing steps so soon after the central bank's previous big easing move on Oct. 31.
"The BOJ need more time to assess the effects of its most recent easing steps, which have not looked very effective in spurring inflation," said Tatsunori Kawai, chief strategist at kabu.com Securities. The BOJ is committed to raising Japan's annual inflation rate to at least 2.0%.
In South Korea, the Kospi index was up 0.5% at 2056.43, while Australia's S&P/ASX 200 was higher by 0.4% at 5948.20 and New Zealand's NZX-50 was down 0.1% at 5850.00.
Write to Gregor Stuart Hunter at gregor.hunter@wsj.com and Brad Frischkorn at bradford.frischkorn@wsj.com
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(END) Dow Jones Newswires
April 08, 2015 06:10 ET (10:10 GMT)
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