Bloomberg News

Hong Kong Stocks Rise for Second Day on China Easing Speculation

February 22, 2012

Feb. 22 (Bloomberg) -- Hong Kong stocks rose for a second day, with the Hang Seng Index adding to a six-month high, amid speculation China may further ease policy to boost growth.

Agile Property Holdings Co., a real estate company partly owned by JPMorgan Chase & Co., advanced 7.2 percent, pacing gains among Chinese developers. Alibaba.com Ltd. surged 43 percent after its parent offered to buy China’s No. 1 e-commerce site for as much as HK$19.6 billion ($2.5 billion). APT Satellite Holdings Ltd. surged 20 percent after Yunsong Wen, the son of Chinese Premier Wen Jiabao, was named chairman at the company’s controlling shareholder.

The Hang Seng Index added 0.3 percent to 21,549.28 at the 4:00 p.m. close in Hong Kong, reversing losses of as much as 0.8 percent after a report that manufacturing growth is slowing sparked speculation that the central bank will cut curbs on lending to invigorate the economy. The Hang Seng China Enterprises Index of mainland companies listed in the city climbed 1.2 percent to 11,823.60.

“Expectations of further monetary easing in China will continue to provide a strong support for equities,” said Linus Yip, a strategist at First Shanghai Securities in Hong Kong. “We may see some consolidation following the big jump we’ve seen in the past month.”

The Hang Seng Index has advanced for the past seven weeks, the longest winning streak since the period ended October 2010, on signs the U.S. economy is improving and bets China will ease monetary policy. The rally drove the gauge’s 14-day relative strength index, a measure of momentum, to about 73 today, exceeding the threshold of 70 that indicates to some traders it’s overbought.

‘Reasonable Valuations’

The Hang Seng Index climbed 17 percent this year through yesterday, with shares in the gauge trading at 10.9 times estimated earnings. That compares with 13.1 times for the Standard & Poor’s 500 Index and 11.1 times for the Stoxx Europe 600 Index.

“Valuations remain reasonable but are no longer cheap,” said Pauline Dan, who helps oversee $480 million as chief investment officer at Samsung Asset Management in Hong Kong. “There’s no real urgency to invest. Economic numbers from Asia are pointing to a slowdown. The concern is whether companies will be able to deliver earnings in this kind of environment.”

Chinese developers in Hong Kong on expectation the government may further ease monetary policy to spur growth after a survey by HSBC Holdings Plc and Markit Economics released today showed China’s manufacturing output may shrink for a fourth month in February.

“With a meaningful rebound of domestic demand not in sight, external weakness is starting to bite, adding more downside risks to growth,” HSBC analyst Qu Hongbin said. The central bank “should step up policy easing as inflation pressures continue to ease.”

Shanghai Property

Agile Property climbed 7.2 percent to HK$10.60. Soho China Ltd., a property developer in Beijing and Shanghai, advanced 5.6 percent to HK$5.68. China Overseas Land & Investment Ltd., the biggest mainland developer traded in Hong Kong, rose 2.8 percent to HK$16.40

Real estate companies also rose after Shanghai Securities News reported that the mainland city eased home-buying restrictions to allow a broader pool of buyers to purchase second properties in China’s financial center. The central bank will cut lenders’ reserve requirements from Feb. 24 to support an expansion of the world’s second-biggest economy.

Alibaba.com surged 43 percent to HK$13.2, the most in four years. Parent Alibaba Group, controlled by billionaire Jack Ma, offered HK$13.50 a share for the remaining 27 percent of the company.

APT Satellite

APT Satellite jumped 20 percent to HK$2.24 after Yunsong Wen, son of China’s premier, was named chairman at the company’s parent, China Satellite Communications Co. Revenue at the state- owned company will reach 16 billion yuan ($2.5 billion), when it will become Asia’s biggest satellite operator, the official People’s Daily said on its website yesterday, quoting a company official it didn’t name.

“With the new appointment, it may help them further develop their business in China,” Ronald Wan, a managing director at China Merchant Securities Co., said by telephone.

Futures on the Hang Seng Index expiring this month gained 0.3 percent to 21,486. The HSI Volatility Index sank 3.1 percent to 22.29, indicating options traders expect a swing of 6.4 percent in the benchmark index over the next 30 days.

--Editors: Jason Clenfield, Jim Powell.

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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