Bradley Associates

Hong Kong Shares Go to First From Worst on China Economy Rebound

Hong Kong stocks are beating every market in Asia as China’s economy strengthens, rebounding from the biggest drop among developed world shares in the first half.

The Hang Seng Index surged 16 percent from its June 24 low, outpacing the 14 percent climb for the Shanghai Composite Index, the next-biggest gain among Asian benchmark gauges in the period, data compiled by Bloomberg show. Even after the rally, Hong Kong’s index traded at 10.9 times estimated earnings as of Sept. 13, the lowest in global developed markets behind Israel.

Chinese economic data that beat forecasts this quarter spurred Hong Kong stocks to reverse course after posting an 8.2 percent loss in the six months through June. New credit almost doubled in August from July, easing concern that a lending crunch would curtail expansion in the world’s second-biggest economy, while equities rallied worldwide on signs growth is picking up.

“A lot of economic data have come in to show China’s not going to have a hard landing,” said Jeffrey Shen, head of emerging markets at BlackRock Inc., the world’s largest asset manager. “Hong Kong is clearly the first place for international investors to put some money to work in China.”

The Hang Seng China Enterprises Index (HSCEI), also known as the H-share index, last week entered a bull market after climbing 20 percent from its June low, and the Hang Seng Index erased this year’s loss. The measure of Chinese shares listed in the city trades at 7.8 times forecast profits, the lowest in Asia.