Bloomberg News

Hong Kong Stocks Advance on Fed Stimulus Speculation

June 20, 2012

Hong Kong stocks advanced, with the benchmark index closing at its highest level in a month, amid speculation the U.S. Federal Reserve will take measures to bolster growth and as leaders from the Group of 20 Nations pledged to support Europe in its struggle with debt.

Techtronic Industries Co. (669), maker of power tools that relies on North America for almost three quarters of its sales, climbed 2.6 percent. HSBC Holdings Plc (5), Europe’s largest bank, rose 2.3 percent. Sands China Ltd., the Asian unit of Sheldon Adelson’s Las Vegas company, gained 3.3 percent after Deutsche Bank AG said Macau casino share prices don’t reflect stronger revenue prospects.

“The focus will be the outcome of tonight’s Federal Reserve meeting,” said Tim Leung, who helps manage about $1.5 billion at IG Investments Ltd. in Hong Kong. “Since what’s happening in Europe is causing some concern, there will be expectation of more easing from the Fed.”

The Hang Seng Index climbed 0.5 percent to 19,518.85, its highest close since May 15. Two stocks rose for each that fell on the 49-company gauge. The Hang Seng China Enterprises Index (HSCEI) of mainland stocks added 0.2 percent at 9,821.22 after a report that an influential Chinese advisory committee called for “really proactive” economic policies to boost growth.

Hong Kong’s benchmark index has fallen about 10 percent from this year’s peak in February amid concern economic growth is slowing in the U.S. and China, while Europe’s crisis spreads. Companies on the Hang Seng Index (HSI) traded at 10 times estimated earnings on average yesterday, compared with 13 for the Standard & Poor’s 500 Index and 10.4 for the Stoxx Europe 600 Index.

Operation Twist

Signs of slowing growth amid Europe’s turmoil could mean the Fed, which ends a two-day meeting today, extends its so- called Operation Twist, according to JPMorgan Chase & Co. and Jefferies & Co. The program involves selling short-term debt and buying longer-term bonds.

Techtronic Industries, which makes Ryobi power tools and Hoover vacuum clears, added 2.6 percent to HK$9.16. Li & Fung Ltd., a supplier of clothes and toys to Wal-Mart Stores Inc. advanced 1.9 percent to HK$15.76.

Euro-area leaders at the Group of 20 summit pledged to “take all necessary policy measures” to defend the currency union and boost protection of the region’s struggling banks, according to the final statement issued at a meeting in Mexico.

Shares of companies that do business in Europe advanced after Spain beat a target for bond sales at an auction yesterday and concern eased that the debt crisis is spreading. HSBC gained 2.3 percent to HK$68.45. Esprit Holdings Ltd. (330), which relies on Europe for most of its sales, gained 2.6 percent to HK$10.30.

Esprit Gains

Shares of Esprit also rose after its largest shareholder Lone Pine Capital LLC increased its stake in the clothier. The hedge fund bought 1.39 million shares at an average HK$10.56 apiece on June 13, according to Hong Kong Stock Exchange data.

Hang Seng Index futures expiring this month rose 1.1 percent to 19,572. The HSI Volatility Index fell 3 percent to 22.3, indicating traders expect a swing of about 6.4 percent on the gauge during the next 30 days.

China’s fiscal policy should be “really proactive” and macroeconomic policies should be readjusted to sustain faster growth, China Daily cited the Standing Committee of the Chinese People’s Political Consultative Conference National Committee as saying.

Sands China (1928) gained 3.3 percent to HK$26.30 after Deutsche Bank analyst Karen Tang said investors have been too pessimistic about the outlook for gambling revenue.

Galaxy Entertainment Group Ltd. rose 6.6 percent to HK$20.25. Wynn Macau Ltd. advanced 5 percent HK$18.48. Shares of the casinos have plunged more than 18 percent since the start of May on concern that demand among high-end gamblers is falling.

To contact the reporter on this story: Crystal Chui in Hong Kong at tchui4@bloomberg.net

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


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