Bloomberg News

Hong Kong Stocks Rise as Cement, Automakers Advace

June 13, 2012

(Corrects first, second and eighth paragraphs to show subsidies are for commercial vehicles. Corrects name of Volvo Car Corp. in second paragraph.)

Hong Kong stocks rose as cement makers advanced after a report the government may relax lending rules for developers. Esprit (330) Holdings Ltd. plunged after its chief executive officer quit.

Geely Automobile Holdings Ltd. (175), a unit of the Chinese automaker that owns Volvo Car Corp., rose 2.9 percent after China said it will give subsidies to replace some commercial vehicles. Anhui Conch Cement Co. (914) gained 3.4 percent after the 21st Century Business Herald reported China may relax rules on lending to local government financing vehicles and property developers. Esprit, a clothier that counts Europe as its largest market, tumbled 22 percent, its biggest drop in almost 15 years, before trading in the stock was suspended.

The Hang Seng Index rose 0.4 percent to 18,943.09 as of 1:22 p.m. local time, after falling as much as 0.3 percent. About as many stocks rose as fell on the 49-member gauge. Volume on the gauge was about 23 percent below its 30-day average, according to data compiled by Bloomberg. The Hang Seng China Enterprises Index (HSCEI) of mainland stocks advanced 0.8 percent to 9,596.20.

“Investors should pick up specific stocks that are cheap, rather than broadly buying in,” said Naoki Fujiwara, who helps oversee about $6.6 billion at Shinkin Asset Management Co. in Tokyo. “Investors are cautious ahead of Greece’s election, leading to fluctuations in the market. We can’t deny the possibility of Greece’s exit from the euro, and that would be the worst scenario.”

Europe Crisis

Stocks fell earlier after Andrew Colquhoun, Fitch Ratings’ head of Asia-Pacific sovereign ratings, said the euro zone is more likely to “muddle through” than break up. If Greece exits the currency bloc and there is material contagion to the periphery, all 17 members would likely face downgrades, he said. Greece holds elections June 17 that may determine the country’s future in the euro.

Hong Kong’s benchmark index tumbled 13 percent through yesterday from this year’s high on Feb. 29 amid slowing economic growth in the U.S. and China and concern Europe’s debt crisis is worsening. Shares on the Hang Seng Index (HSI) traded at 9.7 times estimated earnings on average yesterday, compared with 12.7 times for the Standard & Poor’s 500 Index and 10.2 times for the Stoxx Europe 600 Index.

Geely Automobile rose 2.9 percent to HK$2.85 and BYD Co., a maker of electric cars part-owned by Warren Buffett’s Berkshire Hathaway Inc., advanced 1.9 percent to HK$15.38. China ZhengTong Auto Services Holdings Ltd., an operator of automotive dealerships, jumped 6.8 percent to HK$5.05.

Auto Subsidy

China will give as much as 18,000 yuan ($2,826) in subsidies for the replacement of some trucks and buses, the Ministry of Finance said on its website today.

Building-material makers gained. Anhui Conch gained 3.4 percent to HK$22.75, while China Shanshui Cement Group (691) climbed 4.3 percent to HK$6.05.

China may relax lending rules for local government financing vehicles and property developers in the near term, the 21st Century Business Herald reported today, citing unidentified bankers.

Agile Property Holdings Ltd. (3383), a developer, advanced 2 percent to HK$10.10, while China Overseas Land & Investment Ltd., a developer controlled by the nation’s construction ministry, rose 1.3 percent to HK$17.38.

Esprit tumbled 22 percent to HK$10.50, the biggest drag on the Hang Seng Index, after saying CEO Ronald Van der Vis is leaving “for personal and family reasons.” The resignation came amid efforts to turn around the clothing retailer from an earnings slump. Trading in the shares was suspended from 1:30 p.m.

Profit Warning

Li Ning Co. (2331), a sportswear retailer founded by the former Olympics gymnast of the same name, slumped 3.4 percent to HK$5.07. Bank of America Corp. said the company’s turnaround could take longer than expected and de-stocking could continue into first half of 2013. The stock tumbled 8.1 percent yesterday after the company said it expects a “substantial” profit decline for 2012 from a year earlier.

Digital China Holdings Ltd., a system integration services provider, surged 9.5 percent to HK$13.62 after saying its sales for 12 months ended March 31 rose 24 percent from a year earlier.

Hang Seng Index futures expiring this month climbed 0.4 percent to 18,830. The HSI Volatility Index (VHSI) slid 0.6 percent to 26.51, indicating traders expect a swing of about 7.6 percent in the benchmark index during the next 30 days.

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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