Bloomberg News

Hong Kong Stocks Rise on Optimism Europe Will Act on Debt

July 30, 2012

Hong Kong stocks rose, with the benchmark index gaining for a third day, as European Central Bank President Mario Draghi sought consensus among policy makers for a plan to ease borrowing costs for Spain and Italy.

HSBC Holdings Plc (5), Europe’s biggest lender by market value, added 1.7 percent before the release of earnings. Hutchison Whampoa Ltd., which operates ports in Spain and Germany, advanced 1.3 percent. Jiangxi Copper Co., China’s largest producer of the metal, increased 0.8 percent as copper futures gained for a fifth day. Guangzhou R&F Properties Co., the No. 1 developer in the southern Chinese city, sank 4.1 percent after predicting lower first-half profit.

“The ECB is trying to do everything to help markets,” Binay Chandgothia, a Hong Kong-based portfolio manager at Principal Global Investors, which manages $250 billion globally, told Bloomberg Television. “If they come out and reinforce what they said last week, it might bring more confidence back into the markets.”

The Hang Seng Index advanced 1.6 percent to 19,585.40 at the close of trading in Hong Kong, with all but four shares gaining. The gauge rose 2 percent on July 27, its biggest advance in almost a month, after Draghi said policy makers will do whatever is needed to preserve the 17-nation euro.

Leaders in Berlin, Paris and Rome have backed Draghi’s approach to combat the sovereign-debt crisis before ECB policy makers convene on Aug. 2.

Political Backing

“There is a strong political and financial will for the euro,” said George Boubouras, Melbourne-based head of investment strategy at UBS AG’s Australian unit. The Swiss bank has about $1.5 trillion in assets under management. “Actions that address the EU challenges will create the opportunity for a sustainable rally ahead.”

Companies that do business in Europe advanced. Hutchison Whampoa gained 1.3 percent to HK$69.50. Cosco Pacific Ltd., which operates a port in Greece, increased 2.5 percent to HK$10.68. Esprit Holdings Ltd. (330), a clothier that counts Europe as its biggest market, climbed 3.6 percent to HK$9.44.

HSBC rose 1.7 percent to HK$65.25. The London-based lender reported after Hong Kong’s market closed that first-half net income fell to $8.4 billion from $9.22 billion a year earlier. That fell short of the $9 billion average of 10 analyst estimates compiled by Bloomberg.

Oil, Copper

Raw-material producers gained as crude oil and copper futures advanced for a fifth day. Jiangxi Copper added 0.8 percent to HK$17.04. Cnooc Ltd., China’s biggest offshore oil producer, climbed 1.7 percent to HK$15.50.

The benchmark Hang Seng Index fell 9.7 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 reduced the value of shares on the gauge to 10.3 times estimated earnings on average, compared with 13.5 times for the Standard & Poor’s 500 Index and 11 times for Stoxx Europe 600 Index.

Among stocks that fell today, Guangzhou R&F (2777) slipped 4.1 percent to HK$9.76 after the property developer said it expects a “significant” decline in first-half profit.

China Rongsheng Heavy Industries Group Holdings Ltd., the nation’s largest private shipbuilder, fell 16.4 percent to HK$1.17, its lowest close since its listing in 2010. The company said profit will fall after a sharp decline in orders. Also, the U.S. Securities and Exchange Commission filed a complaint accusing a company owned by Chairman Zhang Zhi Rong of insider trading.

China Cosco Holdings Co. Ltd. (1919), the country’s largest shipowner, fell 3.7 percent to HK$3.17, its lowest close in more than ten months, after saying its preliminary first-half loss widened more than 50 percent as a ship glut weakened rates.

Futures on the Hang Seng Index (HSI) advanced 1.6 percent to 19,546.

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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