Bloomberg News

Hong Kong Stocks Advance as Fed Pledges Low Rates Until 2014

January 26, 2012

Jan. 26 (Bloomberg) -- Hong Kong stocks advanced for a fifth day after the Federal Reserve pledged to keep interest low through 2014 and Chairman Ben S. Bernanke said the central bank is considering more asset purchases to boost growth.

Li & Fung Ltd., a supplier of toys and clothes to retailers including Wal-Mart Stores Inc., climbed 3.4 percent. Chinese lenders and developers advanced on continued speculation the central will ease lending curbs to spur economic growth. Sands China Ltd. led casino operators higher on expectation gambling revenue in Macau will rise to a record this month.

“Mr. Bernanke is presenting the world with a gift,” Khiem Do, Hong Kong-based head of multi-asset strategy at Baring Asset Management Ltd., said in a Bloomberg Television interview. The firm oversees $46 billion. “He wants to underwrite the recovery and underwriting the recovery is very good for equity markets and risk assets.”

The Hang Seng Index gained 1.2 percent to 20,352.64 as of 1:37 p.m. in Hong Kong, set for its highest close since Sept. 1. The gauge has climbed 10 percent so far this month amid bets China will ease lending curbs and on signs the U.S. economy is improving and Europe will contain the region’s debt crisis.

The Hang Seng China Enterprises Index of mainland companies listed in Hong Kong advanced 2 percent to 11,370.74. Markets in Hong Kong resumed trading today following a five-day weekend, while those in China remain closed for the Lunar New Year holiday.

U.S. Futures

Futures on the Standard & Poor’s 500 Index fell 0.1 percent today. The gauge rose 0.9 percent in New York yesterday after Bernanke said policy makers are “prepared to provide further monetary accommodation” if unemployment stays higher than the Federal Reserve would like while inflation falls below a newly- established target.

Exporters advanced. Li & Fung, which gets about 65 percent of sales from the U.S., climbed 3.4 percent to HK$17.78. Techtronic Industries Co., a maker of power tools that counts North America as its biggest market, rose 2.5 percent to HK$9.15.

Foxconn International Holdings Ltd., whose parent Hon Hai Precision Industry Co. makes products for Apple Inc., gained 3.4 percent to HK$5.24 after the maker of the iPhone and the iPad posted record earnings this week.

Futures on the Hang Seng Index gained 0.9 percent to 20,363. The HSI Volatility Index climbed 4.3 percent to 22.75 today, indicating options traders expect a swing of 6.5 percent in the benchmark over the next 30 days.

2011 Tumble

The Hang Seng Index tumbled 20 percent last year amid concern China would continue to curb lending and Europe would fail to resolve its debt crisis. Companies in the gauge traded at 10.2 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 12.7 times.

Chinese lenders and developers rallied today on speculation the mainland will loosen monetary policy. China’s economy will slow in 2012, prompting policy makers to reduce interest rates and ease lending restrictions, Nouriel Roubini, an economist who predicted the 2008 financial crisis, said last week.

Industrial & Commercial bank of China Ltd., the world’s biggest lender by market value, rose 1.9 percent to HK$5.47. China Construction Bank Corp., the nation’s second-largest lender, gained 1.5 percent to HK$6.17.

Agile Property Holdings Ltd., a mainland developer, jumped 5.3 percent to HK$9.28. Guangzhou R&F Properties Co., the No. 1 real estate company in the southern Chinese city, increased 4.3 percent to HK$7.76.

Copper, Casinos

Raw material producers also gained after oil and copper futures increased. The London Metals Exchange Index, which tracks prices of commodities from aluminum to copper, rose for a third day yesterday.

Jiangxi Copper Co., China’s biggest producer of the metal, gained 3.2 percent to HK$20.50. Aluminum Corp. of China Ltd., the nation’s largest supplier of the metal, climbed 4 percent to HK$4.15. Cnooc Ltd., the country’s No. 1 offshore oil producer, rose 2.1 percent to HK$15.82.

Casino operators gained after Union Gaming analyst Grant Govertsen said gambling revenue in Macau this month may surpass the record of 26.9 billion patacas ($3.4 billion) set in October. Visitor traffic to Macau should increase during the week-long holiday in China, Govertson wrote in a note yesterday.

Sands China, Asia’s biggest gambling company by market value, jumped 5.5 percent to HK$26.70. Galaxy Entertainment Group Ltd., founded by billionaire Lui Che-Woo, climbed 5.1 percent to HK$17.66. MGM China Holdings Ltd., a unit of the largest casino operator on the Las Vegas Strip, rose 3.6 percent to HK$12.04.

--With assistance from Rishaad Salamat in Hong Kong. Editor: 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: John McCluskey at j.mccluskey@bloomberg.net


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