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Hong Kong shares rebounded sharply on Friday, as the previous session's selling, triggered by Chinese central bank governor's reference to a “Minsky moment", was viewed by some as overdone, and triggered bargain hunting.
The benchmark Hang Seng index fell the most in two months on Thursday, as investors were spooked by People's Bank of China governor Zhou Xiaochuan's comments that China will fend off risks from excessive optimism that could lead to a “Minsky Moment". European stocks also suffered.
A Minsky Moment, named after economist Hyman Minsky, is a sudden collapse of asset prices after a long period of growth, sparked by debt or currency pressures.
On Friday morning, the Hang Seng index bounced 1.0 per cent to 28,435.38 points, recovering much of Thursday's 1.9 per cent loss. The Hong Kong China Enterprises Index gained 1.5 per cent to 11,531.10.
“The rebound shows the market was wrong yesterday, and some investors merely used an excuse to take profit,” said Robert Di, founding partner of asset manger RPower Capital.
He said there could be some misreading of Zhou's remark.
“What Zhou said was an assumption, a scenario,” Di said, noting the market had interpreted it more as a present reality.
Di's view was echoed by Zhang Yidong, strategist at Chinese brokerage Industrial Securities.
Zhou's reference to “Minsky moment” was part of his analysis of systemic financial risk, but “it was not about China, not about now,” Zhang wrote in a report.
He added that Hong Kong stocks are still cheap relative to equities in many other global markets, and are still worth investing.
According to the brokerage, Thursday's correction attracted nearly 2 billion yuan worth of net inflows from the mainland, as Chinese investors hunted bargains among blue-chips, including Ping An, Bank of China and Tencent .
Investors in Hong Kong also took comfort in overnight firmness on Wall Street, as they pushed up almost all sectors on Friday. The property and financial sectors, which were among Thursday's biggest losers, both rebounded sharply.
China stocks
Mainland stocks, which didn't suffer from brutal sell-offs on Thursday, were relatively calm on Friday morning.
The CSI300 index fell 0.3 per cent to 3,920.68 points at the end of the morning session, while the Shanghai Composite Index gained 0.1 per cent to 3,371.87 points.
Investors were circumspect after policy makers speaking on the sidelines of the 19th Communist Party congress in Beijing vowed to keep financial regulation tight in a bid to ward off potential instability.
UBS economist Wang Tao expected Beijing to publish more measures in the future to rein in risks in areas such as shadowbanking, potentially slowing credit and economic growth
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