Hang Seng Tops 20,000; First Time Since Lehman Fall

July 24 (Bloomberg) -- Hong Kong’s benchmark Hang Seng Index climbed above 20,000 today for the first time since the collapse of Lehman Brothers Holdings Inc., as a rebound in property prices helped push the index up 76 percent since March.

Developers such as Sun Hung Kai Properties Ltd., the world’s largest by market value, helped spur the advance. Aluminum Corp. of China Ltd. and Bank of China Ltd. climbed as China became the first of the major economies to recover from the global recession. Citic Pacific Ltd. surged after the biggest currency derivative losses by any Chinese company prompted a government bailout.

For Lehman, “people have pretty much put it behind” them, said Tat Auyeung, a fund manager at Apex Capital Management in Hong Kong, which oversees more than $400 million. “If we start seeing earnings upgrades, that will push the market even higher. That’s fundamentally the most important driver.”

Rallying stocks in Hong Kong reflect speculation global efforts to repair credit markets and revive economic growth will boost profits. The Hang Seng slumped 64 percent from its October 2007 record to its low this year in March. It fell as much as 43 percent following Lehman’s failure on Sept. 15. China’s pledge to spend 4 trillion yuan ($586 billion) to spur growth helped drive the advance.

Hong Kong has allocated HK$87.6 billion ($11.3 billion), or about 5.2 percent of gross domestic product, to stimulus and relief spending since 2008. The city, battling its worst recession in a decade, probably returned to growth in the second quarter of this year as the declines in exports moderated, Financial Secretary John Tsang said on July 6.

Rising Valuations

The rally drove the average valuation of companies in the Hang Seng to 17.5 times estimated earnings as of yesterday, up from 10.6 at the beginning of this year. The gauge’s 14-day relative strength index, which measures how rapidly prices have risen or fallen in that period, closed at 70 today, the threshold some traders use as a signal to sell.

“This is a liquidity driven market,” said Ben Kwong, chief operating officer at brokerage KGI Asia Ltd. in Hong Kong. “If liquidity continues to stay at this level, it still has a chance to go even higher. But still we may see some profit taking after 20,000. The market may want a breather.”

After breaking through the 20,000 level, the Hang Seng Index then fell as much as 0.5 percent. It ended the day 0.8 percent higher at 19,982.79.

Best Performers

New World Development Co. and Sino Land Co. are the Hang Seng Index’s best performers in the rally since March, as confidence in the city’s real-estate industry returned. Billionaire Cheng Yu-tung’s New World soared 168 percent. Sino Land, controlled by the family of billionaire Ng Teng Fong, surged 162 percent in that time.

The value of residential units sold in June increased 26 percent from the previous month to the highest value in a year, figures from the Land Registry show.

Citic Pacific gained 161 percent in the March rally through yesterday for the Hang Seng’s third-biggest advance. The stock fell to a record low on Oct. 27 as bets on the Australian dollar incurred about $2 billion of losses, forcing former Chairman Larry Yung to seek a bailout from parent Citic Group, controlled by China’s cabinet. link......