Bloomberg News

Hong Kong Stocks Rise on Europe’s Debt Outlook; Esprit Surges

October 13, 2011

Oct. 13 (Bloomberg) -- Hong Kong’s Hang Seng Index rose to its biggest six-day gain in more than two years, as European leaders moved closer to a plan for taming the debt crisis, and after China offered a package to support small companies.

HSBC Holdings Plc, Europe’s largest bank by market value, jumped 3.3 percent as financial shares posted the second-biggest gain among four industry groups tracked on the Hang Seng Index. Evergrande Real Estate Group Ltd., a mainland developer, surged 16 percent after saying sales jumped last month. Esprit Holdings Ltd. jumped 16 percent after the clothier said outdated information may have led a local magazine to conclude it overstated the number of stores it has in China.

The Hang Seng Index rose 2.3 percent to 18,757.81, posting its biggest six-day advance since May 2009. All but six stocks increased on the 46-member gauge.

The Hang Seng China Enterprises Index of Chinese companies listed in Hong Kong advanced 3.7 percent to 9,802.58 after the government said it will provide financial support and preferential tax policies for small businesses. The government will be more tolerant of bad loan ratios for small-company loans, the Cabinet said. The gauge surged 21 percent from its low on Oct. 4, exiting a so-called bear market.

“We’ve seen a short-term bottom for Hong Kong,” said Linus Yip, chief strategist at First Shanghai Securities in Hong Kong. “The market is still on the course for a rebound, helped by regained confidence in the Euro debt problem,” which still isn’t over.

Worst Performance

The Hang Seng Index sank 19 percent this year, making it the worst-performing benchmark index among developed markets outside the euro zone. Shares declined on concern Europe’s debt crisis will spread and derail global economic growth.

Companies on the index traded at 10.1 times forecast earnings at the last close, around March 2009 levels. That compares with 12 times for the Standard & Poor’s 500 Index.

Esprit surged 16 percent to HK$11.78. The shares plunged yesterday after Next Magazine reported the clothier’s website listed 30 outlets in Shanghai and Shenzhen that it claimed either didn’t exist or couldn’t be reached. The article probably used numbers from the company’s website that may be outdated, Chief Financial Officer Chew Fook Aun said in a telephone interview yesterday.

Europe Debt

Cosco Pacific Ltd., which operates container facilities at Greece’s Piraeus port, rose 4.9 percent to HK$10.40, while Standard Chartered Plc, the U.K.’s second-biggest lender by market value, gained 4 percent to HK$176.60.

The Stoxx Europe 600 Index climbed 1.7 percent yesterday to a two-month high as Olli Rehn, the European Commission’s economic and monetary affairs commissioner, said the debt crisis can be resolved.

European Commission President Jose Barroso yesterday called for a reinforcement of crisis-hit banks, the payout of a sixth loan to Greece and a faster start for a permanent rescue fund.

Economic data from Europe helped boost confidence. Production in the 17-nation euro area advanced 1.2 percent in August from July, the EU’s statistics office said. Economists forecast a drop of 0.8 percent.

Fed Minutes

U.S.-related shares also rose in Hong Kong today. Yue Yuen Industrial Holdings Ltd., which makes shoes for Nike Inc., increased 2.1 percent to HK$21.75. Techtronic Industries Co., a maker of power tools that counts North America as its largest market, advanced 6.1 percent to HK$6.30. Semiconductor Manufacturing International Corp., a chip services provider that gets more than half of its revenue from North America, jumped 6.3 percent to 42 Hong Kong cents.

Futures on the Standard & Poor’s 500 Index slid 0.2 percent today. The S&P 500 advanced 1 percent in New York yesterday. Some Federal Reserve officials last month wanted to keep further asset purchases as an option to boost the U.S. economy as policy makers saw “considerable uncertainty” that growth will pick up, the Fed said yesterday in minutes of its Sept. 20-21 meeting.

Property stocks were the biggest gainers by industry, with Evergrande jumping 16 percent to HK$3.39. The company said contracted sales for September rose 79 percent, and that it’s “confident” they will exceed 100 billion yuan ($15.7 billion) in 2012, offsetting investor concern after the ministry of finance said it filed inaccurate financial statements and underpaid taxes at a unit.

Automakers Advance

Chinese automakers rose after Citigroup Inc. analysts Gerwin Ho and Emily Su estimated the nation’s September car sales grew 9 percent from a year earlier, based on figures from China Auto Market.

BYD Co., the automaker backed by billionaire investor Warren Buffett, rose 13 percent to HK$14.98. Dongfeng Motor Group Co., which operates ventures with Nissan Motor Co. and Honda Motor Co. in China, gained 7.1 percent to HK$12.98.

Minmetals Resources Ltd., a copper and alumina producer, rose 9.5 percent to HK$3.57 after metals prices increased, while Jiangxi Copper Co., China’s No. 1 producer of the metal, jumped 11 percent to HK$16.92.

New York-traded copper futures climbed 3.1 percent yesterday, while the London Metal Exchange Index of prices for six metals including copper and aluminum gained 2.4 percent.

Futures on the Hang Seng Index gained 0.9 percent to 18,612. The HSI Volatility Index lost 6 percent to 33.21, indicating options traders expect a swing of 10 percent in the Hang Seng Index in the next 30 days.

--With assistance from Liza Lin in Shanghai. Editor: John McCluskey, Jim McDonald.

To contact the reporter on this story: Kana Nishizawa in Tokyo at

To contact the editor responsible for this story: Nick Gentle at

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