Bloomberg News

Hong Kong Stocks Advance as Report Shows Easing China Inflation

November 09, 2011

Nov. 9 (Bloomberg) -- Hong Kong’s Hang Seng Index rose for a second day after China’s inflation slowed and Italy’s prime minister offered to resign, boosting confidence in Europe’s ability to contain its debt crisis.

Industrial & Commercial Bank of China Ltd. and Evergrande Real Estate Group Ltd. gained at least 2.7 percent after mainland consumer prices rose 5.5 percent in October from a year ago, slowing from 6.1 percent the previous month. Cnooc Ltd. and PetroChina Co. climbed more than 3.3 percent as oil prices increased for a sixth day.

“The CPI data will give the Chinese government more flexibility to stimulate the economy, so I think that’s a good sign for the market,” said Cedric Ma, senior investment strategist at Convoy Asset Management Ltd., which oversees about $230 million in Hong Kong. “Italy seems to have some political settlement in terms of their austerity policy and that’s helping market sentiment.”

The Hang Seng Index rallied 1.7 percent to 20,014.43 at the close, after earlier gaining as much as 2.5 percent. The Hang Seng China Enterprises Index of mainland companies listed in Hong Kong climbed 2.2 percent to 10,917.70.

Moderating inflation may enable Premier Wen Jiabao to ease fiscal and monetary policy as companies complain of a credit squeeze, the property market cools and a likely recession in the euro area threatens exports. Wen said consumer prices have shown an “obvious decrease” since October, the Xinhua news agency reported last night.

Hong Kong Recession

Europe’s sovereign-debt crisis has stirred political unrest across the region, with Italy’s Silvio Berlusconi offering to resign just days after Greek Prime Minister George Papandreou agreed to step aside.

Hong Kong’s economy may have slipped into a recession last quarter as Europe’s debt crisis roiled markets, the city’s Chief Executive Donald Tsang said in an interview at Bloomberg LP’s head office in New York yesterday. The city’s third-quarter growth figures are due Nov. 11, with seven of 15 economists in a Bloomberg News survey forecasting a second straight contraction, meeting the technical definition of a recession.

The Hang Seng Index has lost 13 percent this year, sending its valuation to 9.1 times reported earnings, according to data compiled by Bloomberg. The price-earnings ratio reached 7.4 on Oct. 4, the lowest since 2008.

Hutchison, Evergrande

Hutchison Whampoa Ltd. climbed 1 percent to HK$72.80. The company controlled by billionaire Li Ka-shing said nine-month recurring earnings before interest, tax, depreciation and amortization rose 37 percent.

Industrial & Commercial Bank of China, the nation’s biggest bank, rose 3.6 percent to HK$5.19. Bank of Communications Co., a Shanghai-based lender, jumped 4 percent to HK$5.94. Evergrande Real Estate, China’s second-biggest developer by sales, rose 2.7 percent to HK$3.47.

Data from China’s statistics bureau today showed inflation slowing. Food costs rose 11.9 percent, decelerating from a 13.4 percent increase in September and August. Producer prices increased 5 percent, less than all estimates by 24 analysts in a Bloomberg survey.

Energy companies gained after oil futures rose as much as 0.5 percent today. It gained 1.3 percent to $96.80 a barrel yesterday, the highest settlement since July 28. Cnooc, China’s biggest offshore oil driller, jumped 4 percent to HK$15.66. PetroChina gained 3.3 percent to HK$10.58.

Futures on the Hang Seng Index that expire this month rose 0.7 percent to 19,935. The Hang Seng Volatility Index sank 11 percent to 31.55, indicating options traders expect a swing of 9 percent in the gauge in the next 30 days.

--With assistance from Kana Nishizawa in Hong Kong. Editors: Jason Clenfield, Jim Powell.

To contact the reporter on this story: Lynn Thomasson in Hong Kong at lthomasson@bloomberg.net.

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


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