Bloomberg News

Hong Kong Stocks Rise as Chinese Banks, Metal Producers Advance

October 12, 2011

Oct. 12 (Bloomberg) -- Hong Kong’s Hang Seng Index rose, capping its longest winning streak since May, as Chinese financial shares extended gains, and as metal producers advanced.

China Construction Bank Corp., the nation’s No. 2 lender by market value, rose 2.5 percent, climbing for a second day after a mainland sovereign wealth fund started buying bank shares. Aluminum Corp. of China Ltd., the nation’s biggest producer of the resource by market value, surged 8.5 percent after metal prices rose. Esprit Holdings Ltd. fell 7.5 percent after a report the clothier overstated the number of its stores.

The Hang Seng Index rose 1 percent to 18,329.46, advancing for a fifth day, the gauge’s longest winning streak since May 31. More than three stocks rose for each that fell on the 46-member index. The Hang Seng China Enterprises Index of Chinese companies listed in Hong Kong rose 2.1 percent to 9,455.84.

“People aren’t too bullish or bearish right now, but we may have some recovery from here,” said Alex Wong, asset- management director at Ample Capital Ltd. in Hong Kong. “There is some room for upside” because market has been oversold in recent weeks, he said.

The Hang Seng Index sank 20 percent this year, making it the worst performing developed-market benchmark index outside the euro zone. Shares declined on concern China will maintain its tightening measures and Europe’s debt crisis will spread, damping global demand.

Banks Extend Gains

Companies on the index traded at 9.9 times forecast earnings, around March 2009 levels. That compares with 12 times for the Standard & Poor’s 500 Index.

China Construction Bank gained 2.5 percent to HK$5.24. Industrial & Commercial Bank of China Ltd., the nation’s biggest lender by market value, rose 1.2 percent to HK$4.36, and Agricultural Bank of China Ltd., the nation’s No. 3, rose 2.3 percent to HK$3.06.

Financial shares surged yesterday after China’s state-run Central Huijin Investment Ltd. started buying shares in the nation’s four biggest banks, according to a statement on the fund’s website.

“Valuations, particularly for Chinese banks, are certainly cheap,” said Pauline Dan, Hong Kong-based chief investment officer at Samsung Asset Management, which oversees about $72 billion. “China’s purchases of banking shares is sending a message to investors that we’re nearing the floor. While non- performing loans of Chinese banks could rise, they have stronger balance sheets to weather the increase.”

Aluminum Corp. of China advanced 8.5 percent to HK$4.07. Jiangxi Copper Co., China’s No. 1 producer of the metal, rose 3.3 percent to HK$15.22, while Minmetals Resources Ltd. gained 4.8 percent to HK$3.26.

Copper Price Rises

Aluminum for delivery in three months on the London Metal Exchange gained as much as 0.6 percent. Copper climbed as much as 1.6 percent, reversing an earlier decline of 1.7 percent.

Ping An Insurance Group Co. rose 8 percent to HK$50.20 after UBS AG raised the insurer’s rating to “buy” from “neutral.”

CSR Corp., a mainland maker of railway equipment, surged 14 percent to HK$3.44. The 21st Century Business Herald said CSR’s parent and another company may get 4 billion yuan ($628 million) from the government, citing an unidentified person familiar with the matter. China Railway Group Ltd., a builder of the nation’s railroads, jumped 8.7 percent to HK$1.88.

Shimao, Esprit

Shimao Property Holdings Ltd., which gets all its sales from the mainland, gained 6.3 percent to HK$6.78 after saying contracted sales rose 25 percent in the nine months through September from a year earlier.

Among stocks that fell, Esprit tumbled 7.5 percent to HK$10.18 after Next Magazine, a local publication, said out of 37 directly operated stores and 35 department-store counters in Shanghai listed by the retailer, seven don’t exist and 13 couldn’t be reached. Patrick Lau, Esprit’s investor relations vice president, wasn’t immediately available for comment.

Futures on the Hang Seng Index gained 2.5 percent to 18,445. The HSI Volatility Index lost 8 percent to 35.34, indicating options traders expect a swing of 10 percent in the Hang Seng Index in the next 30 days.

--With assistance from Jonathan Burgos in Singapore. Editors: Jason Clenfield, Jim Powell.

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

To contact the editor responsible for this story: Nick Gentle at ngentle2@bloomberg.net.


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