Traders at work at the New York Stock Exchange. The surprising US job numbers for June, released last Friday, have allayed fears of a recession in the US. Some experts believe that US stocks are expected to edge up 10 percent in future. Eric Thayer / Bloomberg

Investors on buying spree as easing of mainland inflation, fresh stimulus prospects pile on market sentiment

Strong US jobs data, backed by a positive response on Wall Street, fueled a stocks rally across global and Asian bourses, including Hong Kong's, on Monday, providing much needed relief for investors still reeling from the fallout of last month's shock British vote to abandon the European Union (EU).

Asia's advance also got a shot in the arm from slowed Chinese mainland inflation figures for June, as well as a big win for Japan's ruling party in parliamentary elections, both of which gave impetus to hopes that the central banks would step in with fresh stimulus measures to stabilize economic growth.

Hong Kong's benchmark Hang Seng Index stocks chalked up 1.5 percent, or 316 points, at the close of trading to 20,880.5, while the Hang Seng China Enterprises Index, which tracks the performance of H shares, rallied 2 percent to 8,703 points.

Market gurus were upbeat that Hong Kong stocks may see upside potential in the longer term, but warned that the gains might not be substantial.

According to the US Labor Department, employers created 287,000 jobs in June - the strongest job growth in eight months and a sharp improvement from May's 11,000 jobs, easing fears of the world's top economy slipping into recession.

The Dow Jones Industrial Average Index jumped 250.86 points on Monday to 18,146.74, hitting a new high for this year so far.

On the Chinese mainland, the latest inflation figures lifted hopes of further economic stimulus being meted out to boost growth, with the Consumer Price Index (CPI) rising 1.9 percent in June - the lowest since January this year.

Kenny Wen, wealth management strategist at Sun Hung Kai Financial, said Monday's market rebound was principally buoyed by the encouraging US jobs statistics, as well as the easing of the CPI and speculation that the central bank may lower banks' reserve-requirement ratio this month.

Raymond Chan, chief investment officer at Allianz Global Investors, warned that, given the strong but volatile employment numbers for June, the US economy still faces a slowdown, especially in the auto and retail markets.

But, he ruled out the possibility of a US recession, saying he expects the country's GDP growth to reach one to 1.5 percent this year. A global recession, he added, is also unlikely in the next one or two years, but the globalization trend may go in the opposite direction.

Following the UK's vote to leave the EU on June 23, the market sees a US interest-rate hike being held back till the end of the year or, more likely, next year. In Chan's view, the next US rate hike will happen in 2017, but at a slower pace.

As for Hong Kong stocks, he believes their valuation remains relatively cheap and there's space for further increases, taking the cue from US stocks. Driven by recent global equity rallies, US stocks are expected to edge up 10 percent, he predicts, but the upward trend will not be substantial amid worldwide uncertainties, such as the UK's economic slowdown, the banking crisis in Italy and the upcoming US presidential election.

He prefers the telecommunication and technology sectors for local stocks.

tingduan@chinadailyhk.com

(HK Edition 07/12/2016 page9)