30,000, thanks!

July 08, 2020 09:32
Photo: Reuters

There must be some truth to that old stock market adage, after all: May is poor, June is bleak, but July will turn around.

The Hang Seng Index has rebounded 20 percent from its trough this year, breaking the 26,000 level on Monday and looking just about ready to return to its pre-coronavirus level.

Just a few months ago, investors were wondering if the market would ever recover as the economy reeled from the fallout of the months-long social unrest last year, followed by the ongoing ravages of COVID-19.

The local stock market is also seen as most vulnerable to the power struggle between China and the United States.

But the blue-chip index bounced back, benefiting from the rally on Wall Street and the surge in mainland shares. The Nasdaq Composite jumped to a record close on Monday, while the Shanghai Composite Index continued to break the one trillion yuan mark in turnover.

Brokers are comparing this summer rally to the good times in 2017 when the HSI surged past 30,000 before tumbling to bear market in just two months.

Anti-government protesters have a new rallying cry: “30,000, thanks!” It’s a sarcastic reference to the city’s 30,000-strong police force. Investors may want to adopt the slogan, but in reference to the next stock market milestone.

Well, money comes and goes. In the past month, many Hong Kong residents reportedly rushed to open offshore accounts amid worries over the national security law. But then more capital is coming in to chase local opportunities.

For sure, not all Hong Kong stocks went up. In fact, local shares – mostly property and banking counters – underperformed, compared with the new economy stocks such as the ATMX (Alibaba, Tencent, Meituan and Xiaoming) and China plays.

This has fueled speculation that Beijing money is behind the rally. It’s in the national government’s interest, of course, to maintain a semblance of prosperity and stability in the city as this could assuage widespread apprehension among Hong Kong people over the impact of the national security law on the liberties promised them under the Basic Law.

It’s not too hard to harbor optimism in these dark times. Have we not just received HK$10,000 cash? And there’s the probable improvement in our MPF accounts as a result of the global market rally.

There are other favorable factors. Chinese companies listed in the United States are returning to Hong Kong. Looks like China is among the first to rebound from the pandemic, giving it a fresh head start in restarting its economy. Most importantly, the low interest era continues to underpin asset inflation worldwide.

A friend has told me he’s benefiting from the upswing in the equity market in India, which is just as hot as the Hong Kong market, because the COVID-19 hiatus has given him time to study and invest in stocks.

It takes a leap of faith for Hong Kong people to look past the current difficulties such as staff downsizing and corporate bankruptcies and comprehend the surge in the stock market, a leading economic barometer.

Diners and shoppers are coming back as more people return to work. Many restaurants and shops say it’s still about 50 to 70 percent of their usual capacity, but this is bound to improve, provided we don’t experience a second wave. It’s really a matter of seeing the glass half empty or half full.

It may be odd to see both the equity index and the number of COVID-19 cases going up. But then the stock market is never easy to figure, is it?

-- Contact us at [email protected]

EJ Insight writer