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HK stocks climb to 10-mth closing high on weak dlr

Published 10/04/2010, 05:05 AM
Updated 10/04/2010, 05:08 AM

* Oil producers soar on higher crude prices

* Carry trade will continue to boost stocks

* Resistance seen at 23,000 - Tanrich Securities (Updates to close)

By Sui-Lee Wee

HONG KONG, Oct 4 (Reuters) - Hong Kong shares closed at a more than 10-month high on Monday as a weak dollar boosted appetites for equities and oil stocks soared on the back of stronger crude prices.

The benchmark Hang Seng Index <.HSI> finished up 1.17 percent or 260.49 points at 22,618.66. Earlier in the session, it had gained as much as 1.7 percent to an intraday high of 22,734.88.

Turnover rose to a near one-month high of HK$96 billion ($12.37 billion).

Dealers said Chinese retail investors were flocking to Hong Kong stocks as China's stock, money, foreign exchange and commodity futures markets are closed from Oct. 1-7 for the National Day holiday. Trading will resume on Friday, Oct. 8.

"Investors think the quantitative easing policy will continue," said Steven Lam, vice-president at Karl-Thomson Securities. "The U.S. economy is recovering at a very slow pace and it will need monetary policy to stimulate the economy."

Economists at Bank of America Merrill Lynch expect the U.S. Federal Reserve to expand its quantitative easing programme by $500 billion to $750 billion as early as the first quarter of 2011, underscoring a favourable environment for investors.

"It will require very significant negative news now to change the appetite of investors," said Jackson Wong, investment manager at Tanrich Securities. "The U.S. dollar is so weak that investors have no better way to invest than in equities, which are still relatively cheap."

Karl-Thomson's Lam said he saw a return to the carry trade, in which the low-yielding Japanese yen and U.S. dollar are used as cheap sources of funds to buy higher-yielding equities.

But the charts show that gains in the index, which recorded its strongest quarterly performance in a year on Thursday and is up about 3.4 percent so far this year, may slow in the near term.

The index's 14-day Relative Strength Index has risen to 74, a level that indicates the market is now overbought, while Hong Kong stocks are trading at 13-14 times on a price-earnings basis -- nearly touching the 14-15 times that dealers find expensive.

But even with the gains on the relative strength index, Hong Kong is only Asia's fourth-most overbought market, with Indonesian stocks the most overbought.

Wong said the index could face resistance at 23,000, a level that was last hit in November 2009.

Oil producers gained after oil prices touched a two-month high near $82 on expectations that the slow pace of the U.S. economic recovery would prompt a monetary boost that would spur energy consumption. [ID:nSGE69302Q].

PetroChina Co Ltd <0857.HK> added 5.5 percent to a more than five-month high, CNOOC Ltd <0883.HK> advanced 4.9 percent to a more than two-year high.

Macau casino operators soared on hopes the enclave will report strong gambling revenue for September.

Sands China Ltd <1928.HK>, the Macau unit of U.S. casino operator Las Vegas Sands Corp , and SJM Holdings Ltd <0880.HK>, Macau gambling tycoon Stanley Ho's flagship company, both climbed to record levels.

Sands China rose 6 percent, while SJM was up 6.9 percent.

Strong Chinese manufacturing data reassured investors about the strength of China's economic growth. China's manufacturing sector picked up steam in September after a mid-year lull, easing concerns of a renewed downturn in global growth. [ID:nTOE690012] (Editing by Chris Lewis)

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