Bloomberg News

Hong Kong’s Hang Seng Index Rises as Developers Surge on Outlook

February 14, 2012

Feb. 14 (Bloomberg) -- Hong Kong’s benchmark Hang Seng Index rose as developers surged after Nomura Holdings Inc. said it’s bullish on the city’s property shares, countering declines in other companies on concern about Europe’s debt crisis.

Sun Hung Kai Properties Ltd., the world’s biggest developer by market value, rose 3.6 percent. China Resources Land Ltd. jumped 4.2 percent as mainland property shares rebounded from a slump yesterday. Cosco Pacific Ltd., which operates ports in Greece, sank 1.9 percent after Moody’s Investors Service cut the debt ratings of six European countries. Jiangxi Copper Co., China’s No. 1 producer of the metal, slid 1.9 percent after metal prices declined.

The Hang Seng Index rose 0.2 percent to 20,917.83 at the close, after swinging between gains and losses at least 50 times. About three stocks declined for every three that gained in the Hang Seng Composite Index. The Hang Seng China Enterprises Index of Chinese companies listed in Hong Kong retreated 0.5 percent to 11,413.16.

“Markets will pull back in the short-term view, but in the mid-to-long-term I believe that it’s an excellent time to get in,” Andy Mantel, founder and chief executive officer of Pacific Sun Advisors, said on Bloomberg Television in Hong Kong. “We do like property on their long side and on their short side.” The Moody’s downgrades are “not new but the timing is quite surprising, so I think you’ll see a bit negative shock for the Asian markets as a whole,” he said.

Hong Kong’s Hang Seng Index rose 13 percent this year amid positive U.S. economic data and speculation China’s government will ease it monetary policy. Shares in the Hang Seng Index trade at 10.6 times estimated earnings, compared with 12.9 times for the Standard & Poor’s 500 Index and 10.9 times for the Stoxx Europe 600 Index.

Property Stocks Jump

The seven biggest gains in the Hang Seng Index were developers, with the measure of property stocks closing at its highest level since Aug. 4.

Nomura said it’s bullish on Hong Kong developers on an increasing likelihood of a V-shaped recovery in the city’s property market. Home prices are expected to increase 10 percent this year, while retail rents could climb 12.5 percent, the brokerage said in a report dated today. Sun Hung Kai Properties and Henderson Land Development Co. are the top picks, it said.

Sun Hung Kai, the world’s biggest developer by market value, gained 3.6 percent to HK$113.80. Henderson Land, controlled by billionaire Lee Shau-kee, advanced 6 percent to HK$45.40.

Mainland developers also rebounded from a slump yesterday after China’s eastern city of Wuhu suspended a decision to ease property curbs three days after its announcement.

Moody’s Downgrades

China Resources Land rose 4.2 percent to HK$14.56. China Overseas Land & Investment Ltd., a state-owned builder, increased 3.6 percent to HK$15.10.

While China and Hong Kong developers surged, Europe-related shares declined after Moody’s Investors Service cut the debt ratings of six European countries including Italy, Spain and Portugal. It also reduced the ratings of Slovakia, Slovenia and Malta, and revised its outlook on the U.K.’s and France’s top Aaa ratings to “negative,” citing Europe’s debt crisis.

Cosco Pacific slumped 1.9 percent to HK$12.10. Esprit Holdings Ltd., a clothier that gets most of its revenue from Europe, retreated 3 percent to HK$14.50, the biggest drop in the Hang Seng Index.

Metal Producers

Metal producers declined after London Metal Exchange Index of prices for six industrial metals including copper and aluminum slid 0.8 percent yesterday.

Jiangxi Copper slid 1.9 percent to HK$20.90, while Aluminum Corp. of China Ltd., the nation’s No. 1 supplier of the light metal, sank 2.4 percent to HK$4.09.

Kingdee International Software Group Co., a software provider, tumbled 14 percent to HK$1.87 after saying it expects its full-year profit to decrease “significantly” on increase in costs and expenses.

Futures on the Standard & Poor’s 500 Index slipped 0.3 percent today. Futures on the Hang Seng Index expiring this month rose 0.3 percent to 20,966.

The HSI Volatility Index slumped 4.5 percent to 22.26, indicating options traders expect a swing of 6.4 percent in the benchmark over the next 30 days.

--With assistance from Susan Li in Hong Kong. Editor: John McCluskey

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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