Bloomberg News

Hong Kong Stocks Advance on Greek Bailout, Before Fed Decision

March 12, 2012

Hong Kong stocks rose, with the Hang Seng Index (HSI) advancing for a second day, amid optimism euro- area finance chiefs will complete a second Greek bailout, and before a policy decision by the U.S. Federal Reserve today.

HSBC Holdings Plc (5), Europe’s largest lender by market value, gained 1.3 percent. Agile Property Holdings Ltd. led mainland developers higher after China Securities Journal said government agencies called for stable lending policies for first time home- buyers. Tencent Holdings Ltd., China’s biggest Internet company, gained 2.1 percent after Youku Inc., the U.S.-listed operator of the mainland’s most popular online video site, said it plans to buy a rival for $1 billion.

“Investors still believe that economic growth in China is intact,” said Patrick Yiu, associate director at Cash Asset Management Ltd. in Hong Kong. “That means earnings aren’t going to retreat from here and valuations are attractive.”

The Hang Seng Index advanced 1.1 percent to 21,376.44 as of 10:54 a.m. in Hong Kong. Volume on the measure was 10 percent less than the 30-day intraday average before the Fed’s announcement on interest-rate policy. The Hang Seng China Enterprises Index of mainland companies, also known as the H- share index, gained 1.4 percent to 11,381.62.

Even after rising 16 percent this year, stocks on the Hang Seng are still less expensive than those on the Standard & Poor’s 500 Index (SPXL1) or the Stoxx Europe 600 Index. Shares on Hong Kong’s benchmark trade at an average of 10.8 times estimated earnings, compared with 13.1 on the S&P 500 and 11.1 on Europe’s broadest gauge.

S&P 500 Futures

Futures on the S&P 500 rose 0.2 percent today. The gauge was little changed in New York yesterday amid trading volume that fell to its lowest level this year on U.S. equity exchanges.

The Fed is wrapping up a policy meeting today. The Wall Street Journal last week reported the U.S. central bank is considering a strategy that would allow another round of bond buying, so-called quantitative easing, while lowering the risk of inflation.

In Europe, finance ministers are gathering in Brussels today to sign off on a 130 billion-euro ($171 billion) rescue package for Greece. Luxembourg Prime Minister Jean-Claude Juncker said he had “no doubt” that the Greek bailout would be approved and he expected a final decision on March 14.

Futures on the Hang Seng expiring this month gained 1.1 percent to 21,360. The HSI Volatility Index eased 3.2 percent to 20.46, indicating options traders expect a swing of 5.9 percent in the benchmark index over the next 30 days. The gauge of volatility fell to its lowest level since August.

To contact the reporter on this story: Jason Clenfield in Tokyo at jclenfield@bloomberg.net

To contact the editor responsible for this story: Nick Gentle at ngentle2@bloomberg.net


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