(Bloomberg) — Chinese shares listed in Hong Kong jumped the most in almost two years, extending their stimulus-induced euphoria as traders returned from a public holiday.
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The Hang Seng China Enterprises Index climbed as much as 8.4%, extending its winning streak to 13 days. Property developers led gains with a gauge tracking the sector leaping as much as 31%, a record intraday gain, while an index of brokerage shares — seen as a barometer of risk sentiment — jumped 28%. Mainland Chinese markets remain shut until Oct. 8 for a week-long holiday.
The extended rally is driven by optimism about China’s economy and risk assets after the authorities unveiled a range of stimulus measures last week that included interest-rate cuts, freeing-up of cash for banks, and liquidity support for stocks. Four major cities also eased home-buying curbs and the central bank moved to lower mortgage rates.
The gains “reflects a fundamental shift in investor positioning as hedge funds and mutual funds, which had previously been underexposed, are now moving into Chinese assets,” said Billy Leung, an investment strategist at Global X Management in Sydney. “These moves are being supported by a broader reversal in key markets such as copper and Asia Pacific currencies, driven by renewed optimism in China’s growth.”
The attractive valuations of Chinese stocks after a three-year decline are helping to lure investors.
Even with the recent surge, the Hang Seng China Enterprises Index is still below 9 times estimated earnings for the next 12 months, less than half that of the S&P 500, data compiled by Bloomberg show.
Hedge Funds
In another sign of surging investor interest, hedge funds are piling into Chinese stocks at a record pace.
Billionaire investor David Tepper is buying more of “everything” related to China, while the world’s biggest money manager, BlackRock Inc., is now overweight Chinese shares. US-based Mount Lucas Management has entered into bullish positions on China exchange-traded funds, while Singapore’s GAO Capital and South Korea’s…
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