Lee: market thrives with strong IPOs and liquidity, boosting global appeal

Hong Kong’s stock market benchmark has again risen to its highest level in more than three years, buoyed by market optimism. Equity analysts expect the strong southbound capital flows and low HIBOR (Hong Kong Interbank Offered Rate) to support the Hong Kong securities market, which they believe remains undervalued.

The Hang Seng Index broke the 25,000-point mark during Monday morning’s trading, hitting 25,010 points — the highest since February 2022. The equity market benchmark closed 0.68 percent higher to finish at 24,994 points, with a market turnover of HK$263 billion ($33.5 billion).

The Hang Seng China Enterprises Index — a barometer of Chinese mainland companies — edged up 0.6 percent to finish at 9,040 points. The Hang Seng Tech Index, reflecting the city’s technology stock gauge, picked up 0.84 percent to close at 5,585 points.

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“The US stocks are overvalued with a price-to-earnings ratio at a multiple of 25 while Hong Kong stocks remain attractive with a P/E ratio at a multiple of 15. High-risk investors may consider Chinese mainland and Hong Kong funds,” said Michael Chan, managing director at GUM, a local mandatory provident fund (MPF) consulting firm.

“Although the IPO pipeline remains strong and inflows from the Southbound Stock Connect have started to slow, that did not exert significant upside pressure on HIBOR. We expect HIBOR rates to stabilize at lower levels that can mildly stimulate the economy, with excess liquidity flowing into Hong Kong dollar-denominated assets,” said Carlos Casanova, Asia senior economist at Switzerland-based private bank Union Bancaire Privee (UBP).

Value Partners Group said, “The Hong Kong equity market continues to be supported by strong southbound flows. Given the ample liquidity, the HIBOR may continue its uptrend, but will remain much lower than before.”

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The global investment fund manager said that the Hong Kong market benefits from passive fund inflows driven by abundant global liquidity. “With further US-China trade negotiations and potential improvement in the relationship, active funds may narrow their underweight (on the Hong Kong market) over time.”

In his social media posts on Monday, Chief Executive John Lee Ka-chiu said that measures such as maintaining market trading during extreme weather since September and other reforms have further aligned Hong Kong’s securities market with international practices. These efforts have enhanced the special administrative region’s competitiveness as a global financial center by improving financing platform efficiency and attracting more investors to the local market.

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He added that the SAR government will continue to improve the listing system, promote stock market liquidity, and attract high-quality companies to list, further strengthening the city’s appeal and vitality as a listing location.

According to Lee, as of mid-July, there had been 52 initial public offerings, marking a year-on-year increase of 30 percent. These IPOs raised a total of HK$124 billion, a nearly sixfold increase compared to the previous year, ranking Hong Kong’s IPO market as the world’s first in terms of proceeds to date. The Hang Seng Index has risen 25.3 percent so far this year.

Contact the writer at oswald@chinadailyhk.com