Hong Kong Market Closes With Flourish All-Time High Reached On Last Day Under British Rule

Enthusiastic investors sent the Hong Kong stock market soaring to an all-time high Friday, ending more than a century of trading under the British flag with a flourish and signaling confidence in the territory’s financial future.

“The business of Hong Kong will remain business,” said Eugene Chung, an analyst with SBC Warburg Asia Ltd. “People are optimistic about the business environment.”

As the final bell sounded on the Hong Kong Stock Exchange trading floor with the record closing index flashing on a screen, many of the 900 traders, wearing sleeveless red jackets with gold identifying numbers, stood and shouted.

At 15,196.79, the Hang Seng Index was up 68.77, or nearly half a percentage point, with near-record trading volume of 26.02 billion Hong Kong dollars, about 3.34 billion U.S. dollars. Trading was fairly volatile throughout the day.

The previous record, set a week earlier, was 15,154.36.

China went out of its way Friday to reiterate that Hong Kong will remain the country’s global financial center after the British relinquish sovereignty on July 1.

China’s assistant foreign trade minister An Min was quoted as saying the government sees its role as “maintaining and enhancing Hong Kong’s stance as an international trading, finance, navigation and information center.”

The Hong Kong market’s rallies have been fueled by enthusiasm for companies with strong ties to China, especially the so-called “red chips.” Many “red chips” - backed by Chinese government entities - have more than doubled in value this year as investors bet their ties to China will translate into future profits.

“What the handover represents is a closer relationship with China. That’s more involvement of Hong Kong companies in China and more China companies coming to list in Hong Kong,” said David Lui, fund manager of the Schroders Asian Fund.

China-related stocks again provided the strongest gains Friday.

Share prices fell on Monday and Tuesday after China announced new regulations on “red chip” companies, aimed at slowing their rapid pace of expansion and quelling investor frenzy for the shares. But the market bounced back on Thursday - and analysts say the regulations are unlikely to dent the pace of “red chip” growth.

Hong Kong’s bull market is just one indicator of economic optimism as a vibrant international financial center comes under the sovereignty of the world’s largest Communist state - which itself is in the middle of an economic revolution.

China’s fledgling stock markets have more than doubled in the past year.

When the market reopens after a five-day holiday to mark the handover, the British will be gone and Hong Kong will have a semiautonomous government under the Chinese flag.

Many analysts predict the Hang Seng Index will hit another record high next Thursday, to show its confidence on the first trading day under Chinese rule.

In this frenzied, workaholic city, the five-day break has revived fears of a repetition of the 1987 market crash after a similar break. But Anthony Nech, chairman of the Securities and Futures Commission, said regulators will make sure the market “is in good shape” before it reopens.

Share trading in Hong Kong dates back to 1865, when companies were allowed to incorporate with limited liability. Deals were done face-to-face, usually on Queen’s Road in the central district of Hong Kong, said Barrie.

In 1984, when Britain agreed to cede Hong Kong to China with its capitalist system and freedoms intact for 50 years, the value of trades on the Hong Kong Stock Exchange was often less than 100 million Hong Kong dollars a day, about $13 million.

During the past month, it has often topped 20 billion Hong Kong dollars - more than $2.5 billion.