Southbound inflows push Hang Seng Index to 19-month high

Hong Kong stocks surged to a 19-month high on Monday, as southbound capital flow from the mainland hit the highest level in 15 days, taking red-hot internet stocks on a roller-coaster ride.

The Hang Seng Index closed 0.8 per cent or 192 points higher at 24,502, its best level since mid-August 2015, with Hang Seng China Enterprises Index rising 0.7 per cent to 10,583.98. Trading turnover fell 19 per cent from Friday to HK$97.8 billion.

Beauty app Meitu saw its shares jump as much as 28 per cent on Monday to a historic high since December’s listing, at HK$23.05, but they then fell off a cliff in the afternoon to end at HK$16, down 11.2 per cent.

Meitu’s turnover reached HK$3.8 billion, the third highest among eligible stocks under the Shanghai-Hong Kong Stock Connect scheme, next only to heavyweights Tencent Holdings and China Mobile.

IGG, a mobile game developer, saw its shares soar as much as 16 per cent before sliding to close at HK$7.90, a rise of 3.4 per cent.

“Obviously mainland institutions were speculating on those stocks. They’ve been pushing up Meitu stocks [for two weeks],” said Ivan Li Sing-yeung, head of research at Sinopac Securities. “There was a stampede in the afternoon as the valuation became so outrageous compared with its fundamentals.”

Meitu’s share price has now surged 58 per cent since March 6. The company will post its annual results on March 24. Analysts expect it to record 667 million yuan (US$96.7 million) net loss, compared with 2.2 billion yuan net loss a year earlier, according to a poll by Bloomberg.