Players scramble to cover short positions ahead of four-day holiday Surprise action lifts HSI
2001-04-29
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Hong Kong's stock market yesterday enjoyed a surprise burst of afternoon buying activity but traders pegged it on short covering before the long holiday break.
The Hang Seng Index pared earlier losses to finish the day up 0.69 per cent at 13,386.04 points.
Pacific Challenge Securities research director Ricky Tam Siu-hing said investors were cashing in their short positions before the four-day holiday.
Trading does not resume until next Wednesday, which means Hong Kong will watch from the sidelines as Wall Street responds to the United States first-quarter gross economic product figures expected yesterday. Above-consensus figures could boost Wall Street, leaving those short on the Hong Kong market vulnerable.
Nevertheless, after lacklustre trading all week and another dead morning yesterday, the jump in activity in the afternoon took many by surprise.
"It moved up crazily considering there was no news in the market," Fimat Futures sales manager Alan Chak said.
Hang Seng Index futures contracts were bought heavily near the 13,132-point level, shooting the May contract to 13,380 as large orders of 50 to 100 lots piled in.
"The whole market was puzzled by who was the buyer because we have not heard any good news," Mr Chak said.
"There were some rumours that some Chinese funds were buying up the market (before a week-long holiday on the mainland) but I doubt it.
"More of a chance of European buying orders coming to square short positions ahead of (the US) GDP data."
China shares outperformed, with the H-share index jumping 3.32 per cent to 475.01 points and the red-chip index putting on 1.12 per cent to 1,186.96 points.
The H-share gains came despite rumours in the market that China would make an announcement during the holiday week concerning the government holdings in the sector, according to Mr Tam.
A long-running rumour has it that Beijing will allow for trading of state holdings, which could flood liquidity in the sector.
Kim Eng Securities research head Stephen Brown said the short covering might have also been inspired by concerns that many Hong Kong stocks were simply too cheap.
"People are earning 2.34 per cent on savings deposits while Hang Seng Bank (the stock) is yielding 5.15 per cent," he said.
Mr Brown thinks equity selling has been overdone, especially since falling interest rates are destroying value in cash and bond holdings.
Cathyholcombe@scmp.com
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