Bloomberg News

Hong Kong Stocks Rise, Erasing Drop, on China Easing Speculation

January 09, 2012

Jan. 9 (Bloomberg) -- Hong Kong stocks rose, with the Hang Seng Index reversing an earlier drop, as speculation China is easing monetary policy tempered concern about Europe’s debts ahead of a meeting today between German and French leaders.

China Overseas Land & Investment, a state-owned builder, gained 2.7 percent, while Industrial & Commercial Bank of China Ltd., the mainland’s biggest lender by market value, increased 2.8 percent. Lenovo Group Ltd., China’s biggest maker of personal computers, jumped 7.4 percent after HSBC raised its rating to “overweight” from “underweight.”

The Hang Seng Index climbed 1.5 percent to 18,865.72 at the close, the biggest gain in a week, after falling as much as 1.6 percent. The Hang Seng China Enterprises Index of mainland companies listed in Hong Kong increased 2.4 percent to 10,225.81.

The gauges followed stocks in Shanghai, which gained after new lending and money supply in the nation exceeded estimates in December, boosting speculation the government is taking steps to ease a cash crunch.

“If the new lending was higher than expected, that means there was some easing,” said Ben Kwong, chief operating officer at KGI Asia Ltd. in Hong Kong. “Investors are expecting some easing in China before the Lunar New Year, such as reserve ratio requirement cut and support for the market.” China’s week-long Lunar New Year holiday starts from Jan. 23.

The Hang Seng Index had its first annual loss last year since 2008 amid concern China’s measures to curb inflation and the worsening European debt crisis will slow global economic growth. Companies in the gauge traded at 9.4 times forecast earnings at the last close, down from 14.4 times at the beginning of 2011, according to data compiled by Bloomberg. The Standard & Poor’s 500 Index trades at 12.1 times.

Confidence Boosting

Premier Wen Jiabao called for measures to boost confidence in the nation’s stock market, the Shanghai Securities News reported today, citing his comments at the National Financial Work meeting. He urged reforming initial public offerings and improving companies’ dividend payouts, according to the report.

Wen’s call “will help” equities recover from a two-year slump, said the head of UBS AG’s China operations.

China Overseas Land gained 2.7 percent to HK$12.74, and Shimao Property Holdings Ltd., a developer which earns all of its revenue on the mainland, rose 4.6 percent to HK$6.59. Guangzhou R&F Properties Co., a developer in the Southern Chinese city, advanced 5.1 percent to HK$6.19.

ICBC climbed 2.8 percent to HK$4.84 and Agricultural Bank of China Ltd., the nation’s third-biggest lender by market value, rose 2.1 percent to HK$3.39.

Easing Quietly

China’s new loans for December totaled 640.5 billion yuan ($101 billion), exceeding the estimates of all 18 economists surveyed by Bloomberg. M2, a measure of money supply, rose 13.6 percent, compared with the 12.9 percent median of 18 estimates.

“We believe that the easing mode has ‘‘quietly’’ started already, as suggested by the December new loan figure,” Mirae Asset Securities (HK) Ltd. economists Joy Yang and Bill Belchere wrote in a report dated today. “Given that December is usually a slow month for lending, this pick up provides evidence that policies have started to shift to support growth this year.”

Lenovo jumped 7.4 percent to HK$5.99 after HSBC raised its rating and increased the target price to HK$6.75 from HK$5.29.

ETS Group Ltd., a provider of contact-center systems, gained 1.7 percent to 61 Hong Kong cents on its first day of trading after surging as much as 75 percent.

Merkel, Sarkozy

Stocks fell in early trading before German Chancellor Angela Merkel and French President Nicolas Sarkozy meet today for the first time in 2012 as they seek to craft a plan for rescuing the euro over the next three months. The meeting will be followed by a round of talks among euro-area leaders before their next summit in Brussels on Jan. 30.

Germany will sell 4 billion euros ($5.1 billion) of six- month bills today, while France will auction a total of 7.7 billion euros of debt maturing in 364 days or less. Greece, Italy and Spain will auction their debt later this week.

Among stocks that fell, Besunyen Holdings Co., a tea processor and marketer, tumbled by a record 33 percent to 84 Hong Kong cents after saying it expects full-year sales will decline “marginally” and profit will fall “significantly or turn into a marginal net loss” because of slowing demand in China.

Futures on the Hang Seng Index rose 1.5 percent to 18,920. The HSI Volatility Index retreated 3 percent to 23.91 today, indicating options traders expect a swing of 6.9 percent in the benchmark over the next 30 days.

--Editors: John McCluskey, Nick Gentle

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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