Bloomberg News

Most Hong Kong Stocks Rise as Developers Rally; BYD Declines

March 26, 2012

Most Hong Kong stocks advanced as developers rallied on speculation the city’s newly-elected leader Leung Chuan-ying will keep development policies of the previous administration.

Sino Land Co. climbed 4 percent, pacing gains among developers on speculation Leung will keep the development policies of the previous administration. Jiangxi Copper Co., China’s biggest producer of the metal, rose 1.5 percent after copper futures rose. BYD Co., a carmaker partly owned by Warren Buffett’s Berkshire Hathaway Inc., slid 4.8 percent after saying first-quarter profit may slump as much as 95 percent.

“There’s a tug of war between positive and negative factors,” said Terrace Chum, the Hong Kong-based managing director of greater China equities for Manulife Asset Management, which oversees about $199 billion. “Valuations are still not expensive. While some of the companies’ results were below estimates, we could be nearing the trough of the earnings revision cycle. There could be improvements later this year.”

The Hang Seng Index (HSI) was little changed at 20,668.86 at the close in Hong Kong, with three shares rising for every two that fell. Volume on the index was about 10 percent less than the 30- day moving average, according to data compiled by Bloomberg. The Hang Seng China Enterprises Index of mainland companies listed in the city lost 0.6 percent to 10,591.52.

The Hang Seng Index climbed 12 percent this year through March 23 as signs the U.S. economy is recovering fueled confidence in the outlook for exports. The rally boosted the value of stocks on the gauge to 10.4 times estimated earnings. That compares with 13.4 times for the Standard & Poor’s 500 Index and 11.1 times for the Stoxx Europe 600 Index.

Leung Win

Hong Kong developers rallied after Leung’s victory. Sino Land climbed 4 percent to HK$12.62. Sun Hung Kai Properties Ltd. (16), the world’s biggest real-estate company by market value, rose 2 percent to HK$109.10. Cheung Kong Holdings Ltd. (1), the city’s second-largest homebuilder, increased 2.4 percent to HK$103.70.

The market has been worried that Leung would push policies to achieve affordable housing prices in Hong Kong, Adrienne Lui, an economist at Citigroup Inc., wrote in a note to clients. “However, studying his manifesto, his detailed proposed land and housing policies do not differ from what the current administration is pursuing.”

Commodity suppliers advanced as copper futures climbed for a second day and oil traded near a two-day high. Jiangxi Copper gained 1.5 percent to HK$18.06. Cnooc Ltd. (883), the nation’s largest offshore oil producer, added 0.6 percent to HK$16.48.

Turnaround Doubt

BYD slipped 4.8 percent to HK$19.94 today. First-quarter net income may plunge by between 65 percent and 95 percent, the company said yesterday.

“I doubt this year will be a turnaround year for BYD,” said Jack Yeung, Hong Kong-based analyst at BNP Paribas SA. “There is a lot of competition in the low-end segment of the market.”

Of the 205 companies on the Hang Seng Composite Index that reported earnings since Jan. 9, more than a third missed analysts’ estimates, according to data compiled by Bloomberg.

China Construction Bank Corp. (939) dropped 1.2 percent to HK$5.92 after the nation’s second-largest lender posted fourth- quarter profit of 30.2 billion yuan ($4.8 billion). That fell short of 31.4 billion-yuan average estimate of 22 analysts in a Bloomberg survey.

“The results that we’ve seen don’t really justify the rally we’ve seen,” Andrew Sullivan, principal trader at Piper Jaffray in Hong Kong. “As soon as the liquidity dries up, we’re going to have a correction downwards.”

Risks Understated

Chinese financial stocks also slid after a report banks understated the risks associated with about 20 percent of their outstanding loans to local governments. The China Banking Regulatory Commission told lenders last month they had incorrectly placed about 1.8 trillion yuan ($286 billion) of loans in the safest category of lending, according to a person with knowledge of the matter.

Industrial & Commercial Bank of China (601398) Ltd., the world’s biggest lender by market value, slipped 1 percent to HK$4.97. Agricultural Bank of China Ltd. (601288), the nation’s No. 3 lender by market value, dropped 2.4 percent to HK$3.33.

Exporters dropped after purchases of new homes in the U.S. unexpectedly fell in February for a second month, clouding the outlook for the world’s biggest economy.

Yue Yuen Industrial Holdings Ltd., a maker of shoes for Nike Inc., decreased 2.5 percent to HK$27.60. Li & Fung (494) Ltd., a supplier of toys and clothes to Wal-Mart Stores Inc. that counts the U.S. as its biggest market, lost 0.9 percent to HK$19.68.

Futures on the Hang Seng Index expiring this month gained 0.6 percent to 20,728. The HSI Volatility Index slipped 1.4 percent to 20.72, indicating options traders expect a swing of about 5.9 percent in the benchmark index over the next 30 days.

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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