HK Exchange's Arculli seeing bubbles in Asia

Arculli's comments, made in a Bloomberg Television interview in Hong Kong Thursday, were in response to U.S. Federal Reserve Chairman Ben S. Bernanke saying on Nov. 16 that it's “not obvious” asset prices in the U.S. were out of line with underlying values.

“He doesn't see any asset bubble, sitting where he is, which is correct, but in Asia, we're seeing signs of potential asset bubbles,” Arculli said.

Government spending packages and interest-rate cuts to revive the global economy from its worst slowdown since World War II have spurred a rally in asset prices. Hong Kong Monetary Authority Chief Executive Officer Norman Chan said on Nov. 17 that zero interest rates may push investors into riskier assets, threatening to inflate bubbles.

Henderson Land Development Co. last month sold a duplex in the city at a price that the company said was a record high for Asia. Hong Kong's Hang Seng Index has doubled from its March low, while China's Shanghai Composite Index rallied 56 percent in the same period.

The Shanghai index has gained 19 percent this quarter, Asia's best performer, as the government pledged to maintain its “moderately loose” monetary policy. Fan Gang, an adviser to the Chinese central bank, said Thursday that the nation is among emerging markets that face the risks of property and commodity-market bubbles.

Hong Kong Exchanges shares lost 0.6 percent to HK$140.80 at the 12:30 p.m. break in the city Thursday. Optimism for a recovery in trading volumes has helped drive the stock up by 91 percent this year, compared with the Hang Seng Index's 58 percent gain. The bourse's shares tumbled 67 percent last year.

“Over the next 6 to 12 months, we will make some progress towards economic recovery, but there are still one or two bumps that we need to face,” Arculli said in the interview Thursday. “When you get the signs of a firmer recovery, then there will be talks of interest-rate increases. That will be a dampener on the stock market.”

Hong Kong's government said on Nov. 13 that the city's economy grew 0.4 percent in the third quarter, less than economists forecast, as exports dropped.

Rallies by stocks in China's ChiNext startup board in Shenzhen haven't had any noticeable effect on the Hong Kong exchange, Arculli said. Shang Fulin, chairman of the China Securities Regulatory Commission, said Oct. 23 that trading on ChiNext was more likely to be “irrational” than other bourses.

The Nasdaq-like startup board, which has fewer listing requirements than China's two main boards, was created as an alternative for smaller mainland companies, such as Huayi Brothers Media Corp., which surged 148 percent on the first day of trading, to raise funds.

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