Can Hong Kong Stocks Sustain Their Record-Busting Rally?
Zacks Investment Research | Nov 23, 2017 06:53AM ET
Stocks listed on Hong Kong’s benchmark Hang Seng index hit their highest level in more than a decade on Wednesday. The Hang Seng also closed above the 30,000 mark for the first time in more than 10 years, powered primarily by strong earnings performance and remarkable gains posted by a single tech stock.
However, some analysts are already questioning the sustainability of the current rally. A section of market watchers have characterized the rally as a “narrow” one, saying that it has been powered solely by tech stocks. Others point at the troubles hurting China’s economy which could soon spill over into its equity markets.
Tencent Powers Hong Kong’s Rally
The Hang Seng’s spectacular rally has primarily been fuelled by China’s tech behemoth Tencent Holdings Limited (OTC:TCEHY) . Earlier this week, Tencent exceeded Facebook, Inc.’s (NASDAQ:FB) market capitalization for a short while. Shares of Tencent have surged more than 125% year to date, contributing toward more than a third of the Hang Seng’s advance during the same period.
Additionally, Tencent also became China’s first tech company to attain a market capitalization of more than $500 billion this week. The reason for Tencent’s gains is not hard to seek. Strong earnings have been driving the tech major higher, a theme which can easily be extended to explain the success of the Hang Seng as a whole.
Earlier in the month, Tencent posted a strong third-quarter results. The tech behemoth’s income surged 57% on a yearly basis to $3.43 billion. Though the stock has slipped marginally in Thursday morning’s trade, it is still up 8.9% over the last five days. Tencent has a Zacks Rank #2 (Buy). You can see Zacks Investment Research
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