China equity advance creates new corporate giants

China Construction Bank has overtaken JPMorgan, Facebook and Chevron in terms of size, just one example of how a dramatic stock market rally in Hong Kong is reshaping the league table of the world's largest companies.

CCB, China's second largest lender by assets, has risen by a fifth in the past month, giving it a market capitalisation of $248bn. It is now the 15th biggest company on the FTSE All World index, and the third ranked bank after local rival ICBC and US-based Wells Fargo.

Other moves are equally stark. China Merchants Bank rose by 25 per cent on Monday alone, putting it ahead of Barclays, Mitsubishi UFJ, and Royal Bank of Canada, with a market cap of $91bn.

Online games maker Tencent - up 27 per cent over the past month - is now larger than Amazon, Oracle, and Samsung Electronics, while Air China has a bigger market cap than Singapore Air and Cathay Pacific combined, following a 42 per cent rise.

Hong Kong Exchanges & Clearing, the stock market operator, has seen the most dramatic change. Its 65 per cent rise during April has given it a market cap of $44bn, higher than CME and London Stock Exchange put together, and comfortably the world's top listed exchange group.

Citic Securities, China's leadering brokerage, has gained 45 per cent over the past month. At $61bn, it now has a significantly larger market cap than either Blackstone or Credit Suisse.

On Monday the Hang Seng rose for an 8th consecutive day, with a 2.7 per cent gain giving the index its first close above 28,000 points since late 2007. The total capitalisation of all listed shares in Hong Kong topped HK$30tn for the first time ever, while turnover continued to be strong after setting new record last week.

The market has risen 17.6 per cent in the past month, and is now the best performer in the world this year outside the Chinese mainland.

The sudden rally in Hong Kong has been sparked by the arrival of billions of dollars of money from mainland China. Wary of increasingly frothy valuations in Shanghai and Shenzhen, some investors have been switching into lower priced Hong Kong stocks.

Others are looking to get in early before an expected wave of new money from Chinese mutual fund managers, who were given the green light to invest in Hong Kong at the end of March.

"We expect the flows to invest in Hong Kong from mainland investors to continue", said Mandy Chan of HSBC Asset Management in a note.

"That these stocks offer mainland investors better value than expensive [domestic] shares is a no brainer, so it was only a matter of time before we saw a pick-up in these stocks."

Even as Chinese economic indicators worsen - exports dropped 15 per cent in March - the local stock market has also continued to rise. The Shanghai Composite closed at a new seven-year high on Monday after adding 2.2 per cent. Many analysts expect the worsening data to prompt fresh action from the authorities, perhaps in the form of rate cuts.

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