Bloomberg News

Hong Kong Stocks Rebound From Lowest Since 2009; Galaxy Jumps

October 06, 2011

Oct. 6 (Bloomberg) -- Hong Kong’s Hang Seng Index rose, rebounding from the lowest level in more than two years, as exporters advanced amid better-than-expected U.S. economic data, and as gambling and property shares surged.

Techtronic Industries Co., a maker of power tools that counts North America as its largest market, soared 8.9 percent. Macau casino operator Galaxy Entertainment Group Ltd. jumped 18 percent after tumbling 34 percent in the past three days. Agile Property Holdings Ltd. surged 20 percent after Deutsche Bank AG said it sees “emerging” value for long-term investment in developers. Jiangxi Copper Co., China’s No. 1 producer of the metal by market value, rose 11 percent after copper prices gained.

The Hang Seng Index climbed 5.7 percent to 17,172.28 at the close, rebounding from its lowest level since April 2009 on Oct. 4. All but one stock gained in the 46-member gauge. The Hang Seng China Enterprises Index of Chinese companies listed in Hong Kong advanced 5.8 percent to 8,571.49. The city’s stock market was closed yesterday for a holiday and China’s exchanges are shut through Oct. 7 for National Day Holidays.

“The Hong Kong market has been heavily oversold, and there is some bargain hunting,” said Ben Kwong, chief operating officer at KGI Asia Ltd. “If the level is already so low, any good news may provide an excuse for a technical rebound. The momentum isn’t very strong.”

Worst Performer

The Hang Seng Index has tumbled 29 percent this year through Oct. 4, making it the worst performer among the developed markets excluding Europe, as Chinese banks and developers tumbled and as concern the global economy may slip into a recession dragged on exporters and commodity shares. Companies on the index traded at 8.7 times forecast earnings at the last close, compared with 11.4 times for the Standard & Poor’s 500 Index.

Techtronic, maker of Ryobi power tools, jumped 8.9 percent to HK$5.25. Li & Fung Ltd., a supplier of clothes and toys to Wal-Mart Stores Inc., increased 4.3 percent to HK$12.08. Semiconductor Manufacturing International Corp., a chip services provider that gets more than half of its revenue from North America, increased 4.2 percent to 37.5 Hong Kong cents.

Futures on the Standard & Poor’s 500 Index rose 0.5 percent today, erasing losses of as much as 0.4 percent. The S&P 500 climbed 1.8 percent yesterday in New York, gaining for a second day, after data from ADP Employer Services showed U.S. companies added 91,000 jobs in September and the Institute for Supply Management’s non-manufacturing index fell less than forecast. Nasdaq-100 Index futures slid after Apple Inc. said co-founder Steve Jobs died today at age 56.

Casinos Lose

Galaxy Entertainment surged 18 percent to HK$10.48. SJM Holdings Ltd., an operator of casinos and hotels in Macau, jumped 16 percent to HK$12.44 after plunging by a record 26 percent on Oct. 3. Wynn Macau Ltd., a unit of the casino operator founded by billionaire Steve Wynn, advanced 20 percent to HK$20.05.

The gains helped pare losses from earlier this week when Macau casinos plunged amid concern slowing growth in China and slumping stock markets may damp demand. Gambling revenue in the former Portuguese colony grew 39 percent in September, a report published Oct. 4 by the city’s government showed.

Jiangxi Copper gained 11 percent to HK$12.56. Cnooc Ltd. China’s largest offshore oil producer, gained 8.5 percent to HK$12.30.

Crude oil for November delivery jumped 5.3 percent to $79.68 a barrel in New York yesterday after the U.S. government reported an unexpected supply decline. Three-month copper on the London Metal Exchange gained as much as 5.4 percent today.

Long-Term Value

Agile Property jumped 20 percent to HK$5.28. China Overseas Land & Investment Ltd., a developer controlled by the nation’s construction ministry, surged 17 percent to HK$12.16.

“After the recent sell-offs, we see value emerging for a longer-term investment,” Tony Tsang and Jason Ching, analysts at Deutsche Bank, wrote in a note to client yesterday. “We recommend picking up the high-quality developers with a strong financing capacity.”

Gome Electrical Appliances Holding Ltd., an electronics retailer, jumped 14 percent to HK$1.95. Chief Financial Officer Fang Wei said the company is likely to develop retail property by itself in the future instead of through a joint venture with its parent company, according to a Barclays Capital report. Shares of Gome have tumbled since its announcement of a property venture plan with its jailed founder.

“Management said working capital for the majority of its suppliers is healthy despite China’s recent credit tightening,” Candy Huang, analyst at Barclays Capital, wrote in a report dated yesterday.

Short Selling

Stocks also rose after the South China Morning Post reported yesterday Hong Kong’s government as saying it would monitor short-selling in the local stock market after seven brokerages called for a ban on the practice, citing the government and brokerage representatives.

K.C. Chan, secretary for financial services and the Treasury, said today the city’s government will continue to keep a “close watch” on short-selling of securities, while also saying there’s no plan to ban short selling in the city.

“The outcome of banning, in the near term you’re going to have a squeeze upwards,” Emil Wolter, the Singapore-based head of Asian equity strategy at Royal Bank of Scotland Group Plc in a said telephone interview. “If people are forced to close their positions, they don’t have a choice and have to buy.”

Futures on the Hang Seng Index increased 5.9 percent to 17,209. The HSI Volatility Index tumbled 14 percent to 41.25, indicating options traders expect a swing of 12 percent in the Hang Seng Index in the next 30 days.

--With assistance from Lynn Thomasson and Billy Chan in Hong Kong. Editors: Drew Gibson, Jason Clenfield.

To contact the reporter on this story: Kana Nishizawa in Tokyo at knishizawa5@bloomberg.net

To contact the editor responsible for this story: John McCluskey at j.mccluskey@bloomberg.net.


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