Bloomberg News

Hong Kong Stocks Rise on Europe Optimism, China Policy Outlook

December 07, 2011

Dec. 7 (Bloomberg) -- Hong Kong stocks rose, with the Hang Seng Index climbing to a three-week high, on speculation European leaders will step up efforts to contain the region’s debt crisis and China will ease monetary policy next year amid signs inflation is receding.

China Overseas Land & Investment Ltd., the biggest mainland developer listed in Hong Kong, climbed 2.1 percent on speculation China’s central bank will cut interest rates next year. Industrial & Commercial Bank of China Ltd., the nation’s largest lender, rose 2.9 percent. Cosco Pacific Ltd., which operates container facilities in Greece, advanced 3.5 percent.

“While it’s unlikely China will cut interest rates immediately, the government will probably try to increase liquidity to help small and medium-sized enterprises,” said Yoji Takeda, who manages about $1.1 billion at RBC Investment Management (Asia) Ltd. in Hong Kong. “China should be able to achieve a soft landing as the government still has a lot of leeway to ease monetary policy. If Europe can give us some credible measures, that will help stabilize market sentiment.”

The Hang Seng Index advanced 1.6 percent to 19,240.58 at the 4 p.m. close in Hong Kong, the highest since Nov. 15. Almost nine stocks rise for each that fell in the 48-member gauge. The measure gained 7.6 percent last week as China lowered reserve requirements for lenders and the Federal Reserve led five other central banks in cutting the cost of emergency funding for European lenders.

Developers Rise

The Hang Seng China Enterprises Index of mainland companies listed in Hong Kong climbed 2.2 percent to 10,485.51 before a report on Dec. 9 that’s expected to show China’s inflation rate slowed to a 13-month low of 4.5 percent last month.

Developers and lenders advanced as swap traders bet that China will lower interest rates at least twice in 2012 as inflation slows. In contrast with traders, the majority of economists surveyed by Bloomberg predict rates will stay unchanged.

China Overseas Land climbed 2.1 percent to HK$14.36. China Resources Land Ltd., a state-owned developer, jumped 3.4 percent to HK$12.82. ICBC gained 2.9 percent to HK$4.91. Agricultural Bank of China Ltd., the nation’s third-biggest lender by market value, increased 3.2 percent to HK$3.52.

Companies with exposure to Europe gained as a German-French push for closer economic ties in the region won the backing of U.S. Treasury Secretary Timothy F. Geithner. With a European leaders crisis summit scheduled for Dec. 8-9, Geithner said policy makers should work with the central bank to calm financial markets, without mentioning the ECB by name.

Cosco Pacific gained 3.5 percent to HK$9.41. Hutchison Whampoa Ltd., a retailer and port operator that depends on Europe for about half its sales, added 1 percent to HK$68.25.

Raw material suppliers rose after crude oil and copper future increased. Cnooc Ltd., China’s No. 1 offshore oil producer, rose 1.3 percent to HK$15.42. Jiangxi Copper Co., the nation’s largest producer of the metal, climbed 3.7 percent to HK$19.46.

The Hang Seng Index has tumbled 16 percent this year amid concern Europe’s debt crisis was worsening. Companies in the index traded at 10.5 times estimated earnings, down from 14.4 times on Dec. 31, according to Bloomberg data. The Standard & Poor’s 500 Index trades at 12.7 times.

Futures on the Hang Seng Index rose 0.9 percent to 19,195. The HSI Volatility Index dropped 0.9 percent to 28.83, indicating options traders expect a swing of about 8.3 percent in the benchmark index over the next 30 days.

--Editors: John McCluskey, Jason Clenfield.

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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