Will local shares surge on back of the Chinese liquidity rally?

The SGX has been lagging behind other bourses.

Aggressive policy easing by the People’s Bank of China (PBOC) means that Chinese money is being is unleashed in stock exchanges across the world. North Asian stock markets have already received a windfall from the excess liquidity, but the SGX is yet to receive its cut of the jackpot.

Analysts note that Singapore shares may soon benefit if the rally is sustained. According to Ng Wee Siang of Maybank Kim Eng, Chinese markets have been on a tear since last July, while Hong Kong’s Hand Seng Index has soared 10% in two weeks.

“Will the rally extend to Singapore? Possible, if it can sustain for a few months.In our view, sectors which stand to benefit are consumer, healthcare, gaming, property, retail and hospitality, and S-chips,” Ng wrote.

Meanwhile, Nicholas Teo of CMC Markets noted that while last week’s funds flows have mainly been the result of Chinese money let loose to buy into HK, another factor is the fund flows coming into Asia from other continents.

“If that is the case, Singapore shares may also benefit - perhaps even out of default - from any spill-over and perhaps even attempt to narrow the disparity in performance with their North-Asian counterparts,” stated Teo.