Bloomberg News

Hong Kong Stocks Advance as U.S., China Data Lifts Confidence

February 26, 2012

Feb. 24 (Bloomberg) - Hong Kong stocks gained as a leading economic indicator for China increased at a faster pace and after U.S. jobs and housing data beat projections, adding to signs the global economy is recovering.

Li & Fung Ltd., a supplier of toys and clothes to Wal-Mart Stores Inc., rose 3.6 percent. China Overseas Land & Investment Ltd., the biggest mainland developer traded in Hong Kong, added 1 percent. AIA Group Ltd., the third-largest Asia-based insurer by market value, advanced 3.3 percent after reporting the value of new businesses climbed 40 percent.

“As long as macroeconomic conditions remain stable and funding pressures are abating, Asia’s stronger fundamentals should be appreciated,” Daphne Roth, Singapore-based head of Asian equity research at ABN Amro Private Bank, said on Bloomberg Television.“ I do not rule out a short-term consolidation. It would make sense for investors who have participated in the rally to lock in some of the profits and come back at a lower level.”

The Hang Seng Index gained 0.1 percent to 21,406.86 at the close, erasing losses of as much as 0.4 percent. For the week, the gauge fell 0.4 percent, ending a seven week rally that was the longest stretch of gains since October 2010. Shares rose on speculation China would allow banks to lend more and amid signs the U.S. economy is improving.

The Hang Seng China Enterprises Index of mainland companies listed in the city shed 0.2 percent to 11,689.84, paring losses of up to 0.8 percent earlier.

Exporters Gain

Futures on the Standard & Poor’s 500 Index added 0.3 percent today. The gauge rose 0.4 percent yesterday, while the Dow Jones Industrial Average rallied 0.4 percent to 12,984.69, the highest level since May 2008. Shares climbed as applications for U.S. jobless benefits last week held at a four-year low.

Exporters and shipping companies advanced as the Bloomberg Consumer Comfort Index climbed last week to the strongest reading since April 2008, while a U.S. index of housing prices rose 0.7 percent in December, beating economists’ estimates.

Li & Fung, which counts the U.S. as its biggest market, climbed 3.6 percent to HK$18. Yue Yuen Industrial (Holdings) Ltd., a maker of shoes for Nike Inc., rose 1 percent to HK$25.65. China Shipping Container Lines Co., the nation’s second-largest box-cargo line, jumped 5.6 percent to HK$2.47.

The Hang Seng Index climbed 16 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 times for the Stoxx Europe 600 Index.

Relative Strength Index

The rally drove the Hong Kong benchmark index’s 14-day relative strength index, a measure of momentum, to about 73 on Feb. 22, exceeding the threshold of 70 that indicates to some traders it’s overbought.

Chinese developers advanced after the Conference Board’s gauge of leading indicators for the world’s second-largest economy gained 1.6 percent last month after rising 0.8 percent in December. The nation’s central bank on Feb. 18 announced the second cut in bank reserve requirements in three months as policy makers step up efforts to boost liquidity and sustain growth.

China Overseas Land gained 1 percent to HK$16.52. Guangzhou R&F Properties Co., the biggest homebuilder in the southern Chinese city, rose 1.2 percent to HK$10.20. Country Garden Holdings Co., a Guangdong-based real estate company, increased 1.7 percent to HK$3.59.

‘Operational Upside’

AIA Group climbed 3.3 percent to HK$28.30. The value of the company’s new business, a measure of future profitability, surged 40 percent last year to $932 million, overshadowing the 41 percent drop in full-year net income that it reported today.

“Overall this was a very strong set of numbers, on average in-line or ahead of market consensus,” Barclays Plc analysts Mark Kellock and Thomas Wang wrote in a research note today. “We see further operational upside as AIA continues to improve productivity, business quality and profit margins.”

Futures on the Hang Seng Index expiring this month rose 0.1 percent to 21,416. The HSI Volatility Index sank 6 percent to 21.52, indicating options traders expect a swing of 6.2 percent in the benchmark index over the next 30 days.

Air transport companies dropped as crude oil futures extended gains for a seventh day, sparking speculation profits will be hurt. Air China Ltd., the world’s biggest carrier by market value, slipped 0.8 percent to HK$5.94. Shanghai-based China Eastern Airlines Corp. declined 3.7 percent to HK$2.90.

--Editors: Jason Clenfield, Nick Gentle

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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