Bloomberg News

Hong Kong Stocks Have Best Week in Two Years on Europe Debt Deal

October 28, 2011

Oct. 28 (Bloomberg) -- Hong Kong stocks rose for a sixth day, with the Hang Seng Index posting its biggest weekly gain in two years, as European leaders agreed to expand a bailout fund to $1.4 trillion and U.S. economic growth accelerated.

HSBC Holdings Plc, Europe’s biggest lender by market value, gained 4.2 percent in Hong Kong. Li & Fung Ltd., the largest supplier to Wal-Mart Stores Inc., jumped 5.4 percent after the U.S. economy grew last quarter at the fastest pace in a year. Industrial & Commercial Bank of China Ltd., the world’s top lender by market value, rose 2 percent after profit improved.

“It’s likely this rally will last until the end of the year,” Kirk West, Sydney-based executive director of international investments at Principal Global Investors, said on Bloomberg Television. “One of the biggest concerns going into these European meetings was that if they couldn’t come up with a solution, we would have seen a bank go under, and that’s been pushed out. The U.S. GDP number is providing investors some comfort.”

The Hang Seng Index climbed 1.7 percent to 20,019.24 as of the 4:00 p.m. close in Hong Kong, the highest since Sept. 7. More than two stocks rose for each that fell in the 46-member gauge. The Hang Seng China Enterprises Index of mainland companies listed in Hong Kong added 0.6 percent to 10,625.16.

The Hang Seng Index jumped 11 percent this week, the biggest weekly gain since May 2009. Stocks have risen amid signs European leaders are making progress in tackling the region’s sovereign-debt crisis and as China signaled it’s considering policies to boost economic growth.

Rescue Fund

European Union leaders boosted a regional rescue fund to $1.4 trillion and carved out a second aid package for Greece at a debt-crisis summit in Brussels lasting into the early hours of yesterday. Greek Prime Minister George Papandreou said the new bailout package allows the country to buy time and urged Greeks to support his efforts to revamp the economy.

HSBC Holdings gained 4.2 percent to HK$70.10 in Hong Kong. Standard Chartered Plc, the U.K.’s third-biggest lender, climbed 4 percent to HK$188.60. Esprit Holdings Ltd., a Hong Kong-based clothier that gets 79 percent of sales from Europe, rose 4.3 percent to HK$12.54.

Li & Fung, which counts the U.S. as its biggest market, advanced 5.4 percent to HK$15.56. A report showed the U.S. economy grew 2.5 percent last quarter, the fastest annual pace in a year, as Americans dipped into savings to boost purchases and companies invested more in equipment and software.

‘Year-End Rally’

Hong Kong stocks extended gains after Chinese Premier Wen Jiabao announced this week the government will fine-tune policies as needed, sparking speculation China will ease monetary policy to support economic growth. The comment has supported a rebound in the nation’s stocks and may spark a year- end rally, Shen Minggao, the Hong Kong-based head of China research at Citigroup Inc., wrote in a report today.

State-owned China Resources Land Ltd. gained 3.7 percent to HK$12.20, extending its advance for a second day. China Overseas Land & Investment Ltd., the biggest mainland developer listed in Hong Kong, jumped 5.7 percent to HK$15.54.

“More catalysts in policy and fundamentals are possible to lay a solid footing for a year-end rally,” Shen said. “There is more upside than downside going forward. The market momentum may carry on in the near term.”

Citigroup joined UBS AG and Barclays Plc in predicting policy easing after Wen signaled the government is poised to end a two-year monetary tightening campaign as inflation slows and economic growth decelerates.

Chinese Lenders

ICBC gained 2 percent to HK$5.02. The Beijing-based bank said yesterday third-quarter profit climbed 28 percent as lending and fee income increased.

China’s biggest lenders are set to report record annual profits this year after third-quarter earnings rose and bad-debt ratios shrank.

Agricultural Bank of China Ltd., the nation’s largest lender by number of branches, reported a 40 percent increase in quarterly profit on Oct. 26, and rose 1.4 percent today to HK$3.60. Bank of Communications Co., which yesterday reported a 31 percent profit jump, gained 2.1 percent to HK$5.48.

Of the 28 companies on the Hang Seng Composite Index that have reported earnings since Oct. 11, seven beat analysts’ estimates, while 11 fell short, according to data compiled by Bloomberg.

Futures on the Hang Seng Index added 1.5 percent to 20,072. The HSI Volatility Index fell 6.4 percent to 31.89, indicating options traders expect a swing of 9.1 percent in the Hang Seng Index in the next 30 days.

--Editors: John McCluskey, Jim Powell.

To contact the reporter on this story: Jonathan Burgos in Singapore at jburgos4@bloomberg.net.

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


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