(Bloomberg) -- A surge in China Evergrande Group enervated traders in Hong Kong as week-long holidays on the mainland weighed on market turnover.
Evergrande jumped as much as 12 percent, the biggest intraday gain since July last year, after the developer said it plans to move assets into a property company in Shenzhen, where valuations are higher. The Hang Seng Index closed 0.5 percent higher on trading volumes 44 percent lower than the daily average over the past month. PetroChina Co., Asia's biggest oil and gas producer, climbed to a one-month high after oil futures posted a more than 9 percent advance in the four days through Monday.
Trading has been suppressed by a week-long holiday in China, which has closed an equity link with Shanghai. Mainland investors' purchases of Hong Kong stocks rose to a record last month, according to exchange data and Bloomberg calculations.
“China Evergrande shot up because, if you go to the A-share market, you could have higher valuations,” said Linus Yip, a Hong Kong-based strategist at First Shanghai Securities Ltd. “It's not clear at the moment whether the plan -- which is subject to government approval-- will go through as planned. With Chinese markets shut, you could see trading volume falling fast in Hong Kong as inflows from the mainland have stopped.”
The Hang Seng Index finished the day at 23,689.44, with trading volumes near a three-month low. The Hang Seng China Enterprises Index rose 0.8 percent, with much of the gains coming in afternoon trading. The MSCI AC Asia Pacific Index climbed for a second day, adding 0.2 percent. In the currency market, the offshore yuan traded in Hong Kong fell 0.1 percent to 6.6854 a dollar.
October is a good time to invest in Chinese stocks traded in Hong Kong, with the benchmark gauge rising in nine of the last 10 years -- the only exception being during the 2008 financial crisis. The Hang Seng China Enterprises Index has gained an average 5.4 percent in October over the last decade. The track record suggests that buying now and holding for a month would probably hand in a profit, said Andrew Clarke, Hong Kong-based director of trading at Mirabaud Asia Ltd.
Petrochina Co. climbed 1.4 percent. A gauge of property companies declined after China's ministry of housing published a list of 45 real estate developers and property agencies that it said had inflated market prices through illegal behavior. China Resources Land Ltd. retreated 2.1 percent, while China Overseas Land & Investment Ltd. lost 1.6 percent, in the two biggest declines on the Hang Seng Index. MGM China Holdings Ltd. fell 0.7 percent after its rating was cut to hold from buy at Morningstar Inc.
Increased Swings
Swings in the Hang Seng China Enterprises Index are bigger than every other benchmark gauge in Asia, with a measure of volatility climbing to the highest levels last week relative to the Shanghai Composite Index in almost five years, amid inflows from mainland investors.
“There are some signs the H-share market characteristics have become more like A shares but there are still a lot of differences," said Daniel So, a strategist at CMB International Securities Ltd. in Hong Kong. "It's still dominated by international investors -- mainland investors' trading accounts for a small portion of the total turnover."
To contact the reporter on this story: Kyoungwha Kim in Hong Kong at kkim19@bloomberg.net. To contact the editors responsible for this story: Richard Frost at rfrost4@bloomberg.net, Robin Ganguly
Essential Business Intelligence, Sharp Market Insights, Practical Personal Finance Advice, Daily Fuel, Gold and Silver Prices and Latest Stories — On NDTV Profit.
