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Stock bull market on for China, Hong Kong: analyst

HONG KONG (MarketWatch) -- Morgan Stanley said Tuesday it believes a bull market has taken hold for Hong Kong and China equities, citing low valuations and the shift towards monetary and fiscal policy easing. The research house said Hong Kong's China Enterprises Index appears to offer good value against historical measures of earnings and book value. "China has now commenced an interest rate reduction cycle for the first time since September 2008, which could be a potential positive catalyst for the market," Morgan Stanley analysts said in a note Tuesday, in reference to the quarter-point cut to deposit and lending rates announced by the People's Bank of China earlier this month. It also cited accelerated project approvals from Beijing as helping to bolster economic growth rates in the third quarter. A further upbeat factor: Negative wholesale inflation which should benefit corporate profit margins. "We think economic fundamentals are improving, laying the ground for a modest rebound in the third quarter," Morgan Stanley analysts said in the note.