Bloomberg News

Hong Kong Stocks Rise on China Easing Speculation

July 19, 2012

Hong Kong stocks rose for a third day this week, amid speculation China will take more action to boost growth and after U.S. housing starts jumped to the highest since 2008.

Bank of Communications Co. Ltd., the mainland’s fifth- largest bank by value, rose 3.3 percent after China’s swap market signaled a further cut to the reserve ratio requirement for major lenders. Cnooc (MXAP0EN) Ltd., China’s No. 1 offshore oil producer, climbed 2.9 percent as crude traded near a seven-week high. Man Wah Holdings Ltd. (1999), a sofa maker that gets more than half of its revenue from the U.S., gained 4.9 percent.

The Hang Seng Index (HSI) advanced 1.7 percent to 19,559.05 at the close of trading in Hong Kong, with all but four companies climbing in the 49-member gauge. Volume was 13.1 percent above the 30-day intraday average. The Hang Seng China Enterprises Index (HSCEI) of mainland companies rose 2.4 percent to 9,514.85, as infrastructure companies rallied.

“So far we haven’t seen clear signs that the Chinese economy is bottoming,” said Yoji Takeda, who oversees $1.1 billion at RBC Global Asset Management in Hong Kong. “The U.S. market has been firm and housing data was a bit stronger than expected, maybe its shows a relatively stable growth environment in the U.S. Markets are relieved and maybe we’ll see short covers coming in.”

The benchmark Hang Seng Index fell 9.8 percent from this year’s high in February through today on signs Europe’s debt crisis is worsening while growth slows in China and the U.S. The drop cut the value of shares on the gauge to 10.3 times estimated earnings on average, compared with 13.2 for the Standard & Poor’s 500 Index and 10.9 for Stoxx Europe 600 Index.

Swap Rate

Bank of Communications gained 3.3 percent to HK$5.01. The cost to lock in the three-month Shanghai interbank offered rate for a year was near a two-year low according to data compiled by Bloomberg, signaling a further cut in banks’ reserve requirements may be on the cards.

Industrial & Commercial Bank of China Ltd., the nation’s largest lender, rose 2.5 percent to HK$4.15. Agricultural Bank of China Ltd., advanced 3.1 percent to HK$3.04. China’s four biggest banks extended about twice as many new loans in the first half of July compared with the same period last month, the Shanghai Securities News reported earlier.

Share of infrastructure-related companies surged. China Railway Construction Corp. (1186) jumped 4.4 percent to HK$6.87. Jiangxi Copper Co., the nation’s biggest producer of the industrial metal, climbed 0.9 percent to HK$17.48.

China has “relatively large” room to boost fiscal spending to support economic growth, Zhang Peng, a Beijing-based researcher with the Fiscal Research Institute at the Ministry of Finance, said yesterday in a telephone interview.

Oil Rises

Cnooc gained 2.9 percent to HK$15.80, recovering yesterday’s losses after oil for August delivery traded above $90 for the first time since May. PetroChina Co., the country’s largest refiner, rose 2.2 percent to HK$9.71.

New U.S. home construction reached its highest level in almost four years in June, boosting Hong Kong-listed companies that sell goods to the world’s largest economy.

Man Wah gained 4.9 percent to HK$3. Techtronic Industries Co., a maker of power tools that relies on North America for 72 percent of its sales, advanced 1.2 percent to HK$10.02, closing at a three-month high.

Futures on the Hang Seng Index gained 1.9 percent to 19,566. The HSI Volatility Index (VHSI) fell 1.9 percent to 19.09, indicating traders expect a swing of about 5.5 percent in the benchmark index during the next 30 days.

To contact the reporters on this story: Nick Gentle in Hong Kong at ngentle2@bloomberg.net; Patrick Boehler in Hong Kong at pboehler@bloomberg.net

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


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