Hang Seng Index rises for sixth session, valuations still cheap

The Hang Seng Index closed up 0.3 percent to 11,446.52 on Friday. With valuations still relatively cheap, funds are targeting lower valued inventory.

Markets in China will resume trading on Jan. 30 following a week-long Lunar New Year holiday.

A feature of trading on the Hong Kong bourse over the past six sessions and the last couple of weeks has been the flow of funds into Hong Kong equities.

The reason?  Companies in the Index trade around 10.3 times forecast earnings, down from 14.4 times at the beginning of 2011.

With the Hong Kong market down 20 per cent in 2011, fund managers are sitting on high cash levels and money is finding a home in cheaper priced equities.

On Friday, Li & Fung rose 3.4 percent after the consumer goods exporter announced the first acquisition by its regional distribution arm LF Asia, fuelling hopes for accelerating expansion.

Li & Fung, a major supplier of merchandise to US retailers Target Corp and Wal-Mart Stores Inc, closed at its highest since May 20 last year. It has surged 28 percent in January to date, also partly on the back of an improving US economy.

China Mobile gained 1.9 percent and was the Hang Seng Index's top gainer.

Its smaller competitor, China Unicom, which was among the best performers in 2011 as investors sought the relative safety of its perceived steady earnings growth, climbed 2.2 percent.