Bloomberg News

Hong Kong Stocks Rise a Third Day Amid Global Recovery Optimism

October 25, 2011

Oct. 25 (Bloomberg) -- Hong Kong stocks rose for a third day after better-than-expected earnings at Caterpillar Inc. pointed to a recovery in the U.S. and commodity shares climbed on optimism about China’s economic outlook.

Citic Pacific Ltd., a Hong Kong steelmaker, surged 5.9 percent. Li & Fung Ltd., an exporter of toys to the U.S., climbed 3.1 percent. Cnooc Ltd., China’s largest offshore oil producer, advanced 5.4 percent. Tencent Holdings Ltd., the mainland’s top Internet company by revenue, rose 2.6 percent. Esprit Holdings Ltd., which gets 79 percent of its revenue in Europe, lost 3.2 percent before a meeting tomorrow to discuss ways to contain the region’s sovereign-debt crisis.

“Stocks have rebounded because the outlook for the U.S. and China is not as bad as investors had thought,” said Grace Tam, Hong Kong-based vice president of investment services at JPMorgan Asset Management Ltd., which oversees about $1.3 trillion globally. “Investors are expecting some kind of resolution announced after the EU summit. They could easily be disappointed if it turns out to be only a broad package without sufficient details.”

The Hang Seng Index gained 1.1 percent to 18,968.20 at the close of trading in Hong Kong. Almost three times as many stocks rose as fell in the 46-member gauge. The Hang Seng China Enterprises Index of mainland companies listed in Hong Kong advanced 1.5 percent to 9,860.98.

Caterpillar

Futures on the Standard & Poor’s 500 Index were little changed today. The gauge climbed 1.3 percent in New York yesterday, advancing for a third day after Caterpillar, the world’s top construction- and mining-equipment maker, posted higher-than-expected profit and said 2012 revenue will gain as the U.S. and global economies recover. The stock rose 5 percent.

While the European debt crisis and slow U.S. growth are concerns, they don’t “signal the onset of recession,” Caterpillar said. The world economy will grow 3 percent this year and 3.5 percent in 2012, with the U.S. and Japanese post- earthquake reconstruction accounting for much of the expansion, it said yesterday.

European Union leaders will hold a second summit in four days tomorrow in a bid to avert an escalation of the sovereign- debt crisis, which has roiled global markets. The talks aim to reach an agreement on bolstering the region’s rescue fund, recapitalizing banks and providing debt relief to Greece to avoid contagion spreading to Italy and Spain.

“One of the most positive signs of the rally is the fact that it was not solely built on Europe optimism,” said Stan Shamu, a strategist at IG Markets in Melbourne. “The fact that U.S. companies are continuing to report strong earnings and are flush with cash is a very bullish sign going forward. Investors are increasingly beginning to believe European leaders will succeed in preventing a spread of the region’s debt crisis.”

Commodity Prices

Citic Pacific surged 5.9 percent to HK$13.28. Li & Fung rose 3.1 percent to HK$14.08. Cathay Pacific Airways Ltd., Hong Kong’s largest international carrier, advanced 2.9 percent to HK$14.12.

Oil and mining companies gained after commodity prices rose yesterday following a report that showed China’s manufacturing may expand in October for the first time in four months. The London Metal Exchange Index of prices for six metals, including copper and aluminum, increased 5.9 percent, the most in three years, while New York-traded crude oil futures climbed 4.4 percent.

Cnooc surged 5.4 percent to HK$14.42 and China Coal Energy Co. surged 5.3 percent to HK$9.21.

Consumer Stocks

Tencent rose 2.6 percent to HK$176.90. China Unicom (Hong Kong) Ltd., the nation’s second-largest mobile-phone carrier, added 2 percent to HK$16. Belle International Holdings Ltd., a Chinese retailer of women’s shoes, climbed 2 percent to HK$14.46.

Futures on the Hang Seng Index rose 0.7 percent to 18,983. The HSI Volatility Index fell 1.2 percent to 34.96, indicating options traders expect a swing of 10 percent in the Hang Seng Index in the next 30 days.

Among stocks that fell today, Esprit dropped 3.2 percent to HK$10.42 ahead of the European summit. Cosco Pacific Ltd., which operates container facilities at Greece’s Piraeus port, lost 1.6 percent to HK$10.12.

--Editors: Jim Powell, Nick Gentle

To contact the reporter on this story: Shani Raja in Sydney at sraja4@bloomberg.net

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


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