In­vestors re­main bullish de­spite day of profit tak­ing

Talk of pos­si­ble US in­ter­est rate rise does lit­tle to dampen op­ti­mism

China Daily (Canada) - - BUSINESS - By XIE YU in Hong Kong xieyu@chi­

In­vestors in Hong Kong and the Chi­nese main­land are tak­ing prof­its af­ter the re­cent rally, al­though they said they have re­mained un­fazed by talk of an in­ter­est rate rise in the United States.

The Jack­son Hole Sym­po­sium takes place on Fri­day and it could in­di­cate firmer moves by the US Fed­eral Re­serve to phase out the quan­ti­ta­tive eas­ing pro­gram.

An in­ter­est rate rise, push­ing up the value of the dol­lar, could trig­ger a re­verse flow of for­eign cap­i­tal that was seen as one of the ma­jor driv­ing forces be­hind the lat­est ral­lies in the Hong Kong and main­land stock mar­kets. But many stock an­a­lysts said other economic fac­tors have re­mained strong enough to keep the bull run­ning.

“We cashed out all the A shares by this morn­ing,” said Xin Yu, pres­i­dent of the Guangzhou-based Ze­quan In­vest­ment, adding warm­ing economic data and eas­ing poli­cies in the past two months have boosted in­vestor con­fi­dence and trig­gered the rally.

“But we be­lieve there is a ten­dency of over-op­ti­mism among in­vestors and we do not see a sus­tain­able cat­a­lyst to sup­port more growth at this stage,” he said.

The bench­mark Shang­hai Com­pos­ite In­dex re­treated 0.44 per­cent to 2,230.46 on Thurs­day at the close, with turnover ex­pand­ing to 140.9 bil­lion yuan ($22.7 bil­lion) from 139.6 bil­lion yuan on Wed­nes­day.

The much-awaited Hong Kong-Shang­hai Stock Con­nect pro­gram due in Oc­to­ber has largely boosted in­vestors’ con­fi­dence that more liq­uid­ity will lift the un­der­val­ued shares in both the main­land and Hong Kong mar­kets. The Shang­hai Com­pos­ite In­dex rose to eight-month highs this week, and Hong Kong’s Hang Seng In­dex also jumped to more than six-year highs.

Xin­said the in­flow of for­eign cap­i­tal has been an im­por­tant driv­ing force. Ex­change-traded funds un­der an in­vest­ment scheme in the Chi­nese cur­rency recorded net in­flows of 8.2 bil­lion yuan in July, the high­est sinceDe­cem­ber2012and­nearly dou­bling from June, ac­cord­ing toMorn­ingstar data.

Some in­vestors are in­clined to a pull­back be­fore the Fed’s chair­woman, Janet Yellen, gives a speech at the cen­tral bank’s an­nual con­fer­ence in Jack­sonHole on Fri­day.

“The an­nual ad­dress is of­ten used by the lead­ers of the cen­tral bank to lay out ma­jor pol­icy di­rec­tions. It is ex­pected to give clues of future pol­icy di­rec­tions, rather than de­tailed poli­cies,” said Pu Yong­hao, re­gional chief in­vest­ment of­fi­cer of North­ern APAC, UBS Wealth Man­age­ment.

Some Fed pol­i­cy­mak­ers think the US econ­omy is im­prov­ing enough that the bank should start con­sid­er­ing rais­ing short-term in­ter­est rates.

Pu said he does not ex­pect there will be a dra­matic sig­nal or big sur­prise re­gard­ing a rate in­crease, based on the Fed’s lat­est eval­u­a­tion of the US la­bor mar­ket, which is key to their pol­i­cy­mak­ing. It is more likely that the Fed will give clues for the mar­ket to read and re­po­si­tion.

Chris Lai, eq­uity

re­search as­so­ciate with Bank of Amer­ica Mer­rill Lynch, said: “The house view in­sists that there won’t be an in­ter­est rate rise be­fore the third quar­ter of 2015.”

Stock mar­kets in the main­land andHong Kong are more en­gaged in pos­i­tive mes­sages now, in­clud­ing macro-stim­u­lus poli­cies, the Hong KongShang­hai Stock Con­nect pro­gram and the main­land Sta­te­owned en­ter­prise re­form, Lai said.

“We are bullish about the mar­ket per­for­mance to­ward Oc­to­ber. And over­seas in­vestors are having much stronger sen­ti­ment about the A and H shares nowa­days, com­pared with­March and April,” he said.

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