Bloomberg News

Hong Kong Stocks Rebound From Drop on North Korea Leader’s Death

December 20, 2011

Dec. 20 (Bloomberg) -- Hong Kong’s Hang Seng Index rose, rebounding from yesterday’s drop on concern the death of North Korea’s Kim Jong Il will lead to instability in the region. Chinese developers fell on declining home sales.

Hang Ten Group Holdings Ltd., a Hong Kong-based clothier, surged 56 percent after receiving a buyout offer. PetroChina Co., a mainland crude producer, gained 1.5 percent as oil prices rose. China Overseas Land & Investment Ltd. sank 3.5 percent after a report showed home sales dropped in 29 out of 35 mainland cities in the week through Dec. 18.

The Hang Seng Index rose 0.1 percent to 18,080.20 at the close, with about five stocks declining for every four that rose in the 48-member gauge. The volume of stocks traded was about 40 percent less than the average over the past 100 sessions, according to data compiled by Bloomberg. The Hang Seng China Enterprises Index of mainland companies listed in Hong Kong gained 0.1 percent to 9,740.01.

“There’s some recovery as the market sentiment stabilizes after the panic yesterday on Kim’s death,” said Ben Kwong, chief operating officer at KGI Asia Ltd. “Riots or instability aren’t surfacing at the moment.” The Hong Kong gauge is “down to a relatively low level, so there’s bound to be some bargain hunting, but if you look at the turnover, liquidity is still not ample enough to create an upward trend.”

Kim’s Death

The Hang Seng Index slumped as much as 2.5 percent yesterday on news of Kim’s death. The gauge fell 22 percent this year, led by banks and developers, as China took steps to curb inflation and property prices, and on concern Europe’s debt crisis will spread. Companies in the gauge traded at 9.8 times forecast earnings, down from 14.4 times on Dec. 31, according to data compiled by Bloomberg. The Standard & Poor’s 500 Index trades at 12.2 times.

Hang Ten surged 56 percent to HK$2.65 after a HK$2.65 billion ($340 million) buyout offer from Li & Fung Retailing Ltd. that values the shares at 59 percent more than their previous close.

Shares of Yanzhou Coal Mining Co., a mainland coal producer, were suspended from trading in Hong Kong today at the company’s request, pending a price-sensitive announcement. Yanzhou plans to acquire Australia’s Gloucester Coal Ltd. for at least $2 billion, Bloomberg News reported yesterday, citing a person with knowledge of the matter who asked not to be identified as the details are confidential.

Developers Drop

PetroChina advanced 1.5 percent to HK$9.12, and China Petroleum & Chemical Corp., known as Sinopec, gained 0.8 percent to HK$8.04. Crude futures rose as much as 1 percent in New York today as investors bet that supply may tighten amid signs U.S. crude stockpiles shrank last week.

Developers dropped after Soufun Holdings Ltd. said property transactions declined in the week ended Dec. 18. Sales in 11 cities fell more than 50 percent in the period, the real estate website owner said. Separately, Sofun said China’s home prices and sales will continue to fall in the first-half of next year.

China Overseas Land slid 3.5 percent to HK$13.36. China Resources Land Ltd., a state-owned developer, retreated 2.1 percent to HK$12.22.

Futures on the Hang Seng Index slid 0.5 percent to 17,979. The HSI Volatility Index fell 4.1 percent to 27.08, indicating options traders expect a swing of 7.8 percent in the benchmark over the next 30 days.

--Editor: John McCluskey, Jason Clenfield.

To contact the reporter on this story: Kana Nishizawa in Hong Kong at knishizawa5@bloomberg.net

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


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