The Hong Kong stock market advanced on Thursday with the Hang Seng Index picking up 1.8 percent. The rally was in response to a fresh surge in oil prices and a marked improvement in investor sentiment. Edmond Tang / China Daily

Heavyweight, oil chips lead advance as HSI rebounds 385 points after hitting highest level this year

Taking the cue from Wall Street's solid gains on the back of a renewed surge in oil prices, Hong Kong's stock market staged a strong rebound on Thursday, rallying 1.8 percent, with oil-related and heavyweight stocks pacing the advance.

Following the steepest fall in local share prices in two weeks on Wednesday, the Hang Seng Index (HSI) soared 1.8 percent, or 385 points, to close at 21,622 points with a market turnover of HK$73 billion ($9.42 billion).

The city's benchmark gauge had climbed 398 points at one stage to 21,634 - the highest level so far this year - before retreating to the closing level.

The Hang Seng China Enterprises Index (HKCEI) - the index tracking mainland shares listed in Hong Kong, or H shares - picked up 1.25 percent, or 113 points, to close at 9,248.

China Oilfield Services, PetroChina Co and Sinopec (China Petroleum & Chemical Corp) led gains on the Hong Kong bourse after oil prices rebounded, while international banking stocks, including HSBC Holdings and Standard Chartered Holdings, also advanced, boosting market sentiment.

Financial analysts said investor sentiment strengthened as market fears of further US interest-rate hikes and a sliding yuan exchange rate receded. The US Federal Reserve had signaled that fresh interest-rate increases this year would be slowed, while the Chinese currency has stabilized against the greenback.

"The US Federal Reserve has not raised interest rates since March, and the European Central Bank's rate cut has prompted global investors to take a risk-on approach, fuelling price gains in other currencies trading against the dollar, emerging stock markets and commodities," Judy Chang, chief investment officer at CIFM Asset Management (Hong Kong) said on Thursday.

Market experts said Hong Kong is home to some of the strongest companies in Asia and the recent $2-trillion equity rout has made the city's shares too cheap to pass up.

"Investors are increasingly finding Hong Kong equities attractive," said Castor Pang, head of research at Core Pacific-Yamaichi Hong Kong. "The risk-return ratio of Hong Kong stocks is reasonable and the valuation gap is likely to narrow further."

The HKCEI has rebounded 23 percent from this year's low and entered a bull market last month on signs the mainland economy and the yuan are stabilizing. Concerns about a depreciating yuan and capital outflows helped drag the gauge of 40 members to its lowest level in about seven years on February 12, sending valuations to record lows.

"I can understand from the macro viewpoint of a number of strategists saying Hong Kong is not looking great," said Khiem Do, Hong Kong-based head of multi-asset funds at Baring Asset Management. "But, when you look at the companies, they are very hard-nosed, very bottom-line focused. There will always be some great companies in Hong Kong trading at a reasonable price which one has to buy because they're very well managed."

Bloomberg contributed to this story.

oswald@chinadailyhk.com

(HK Edition 04/22/2016 page8)