Bloomberg News

Hong Kong Stock Book Longest Winning Streak Since 2011

October 19, 2012

Hong Kong’s benchmark stock index rose, capping its longest winning streak since January 2011, as cement and automakers advanced today. Gains were limited after a China central bank adviser said the nation won’t provide big economic stimulus measures.

Anhui Conch Cement Co. (914), China’s biggest supplier of the building material, rose 2.6 percent, extending yesterday’s gains as Bank of America Merrill Lynch turned positive on the sector. Dongfeng Motor Group Co., a Chinese automaker, gained 4.7 percent after Daiwa Capital Markets Hong Kong Ltd. said car sales in the nation may grow in October. Chinese developers fell on a report that a researcher at the Ministry of Housing said China will maintain limits on property purchases.

The Hang Seng Index (HSI) rose a seventh day, gaining 0.2 percent to 21,551.76 at the close, with about three stocks advancing for every two that fell on the 49-member gauge. The measure advanced 2 percent for the week, a seventh straight week of advance. If the streak extends next week, it would be the longest run since November 2006.

“People believe that China’s economy has bottomed and there won’t be any hard landing,” said Francis Lun, managing director at Hong Kong-based brokerage Lyncean Holdings Ltd. “The general mood is optimism. Even though the macro economy seems to be doing well, export growth is still very low for China. The Hong Kong market has been rising, which means a correction can happen any time and there may be some profit taking.”

China Growth

Volume on the Hang Seng Index was 2.4 percent below the 30- day average for the time of day, according to data compiled by Bloomberg. The Hang Seng China Enterprises Index (HSCEI) of mainland companies, also known as the H-share index, gained 0.5 percent to 10,683.61. The measure rose yesterday after China reported third-quarter economic growth that matched economists’ estimates, and after Xinhua News Agency cited Premier Wen Jiabao as saying China’s “economic growth has started to stabilize.”

The Hong Kong equity benchmark rose 3.3 percent this month through yesterday, extending last month’s 7 percent advance, as Chinese lenders gained on prospects for more stimulus measures in the world’s second-largest economy. The Hang Seng Index traded at 11.3 times estimated earnings on average yesterday, compared with 13.9 times for the Standard & Poor’s 500 Index and 12.3 times for the Stoxx Europe 600 Index, according to data compiled by Bloomberg.

Black Monday

Futures on the S&P 500 slid 0.1 percent today. The gauge fell 0.2 percent yesterday as technology shares dropped after Google Inc. reported third-quarter profit and sales that missed estimates. Google slumped 8 percent after its earnings report was filed inadvertently during regular trading hours.

Today marks the 25th anniversary of the so-called Black Monday, the worst one-day global stock crash in history. The Hang Seng Index tumbled 33 percent on Oct. 26, 1987, following a four-day suspension by the city’s stock exchange.

“It was disbelief, hopelessness,” said Lyncean’s Lun, who owned a real-estate investment company in Hong Kong during the crash. “They thought if you stop the market then the market will return to normal, but of course that did not happen, the market crashed. Now you have program trading dominating the equity markets around the world. A glitch in a computer could plunge the stock markets around the world into the abyss. There’s much more system risk than before.”

Anhui Conch rose 2.6 percent to HK$27.25, while China Shanshui Cement Group Ltd. (691) advanced 3.6 percent to HK$6.03. Cement shares rose yesterday after Bank of America Merrill Lynch said demand for the material will rise 6.7 percent in 2013 from 5.3 percent in 2012.

Carmakers Climb

Dongfeng Motor climbed 4.7 percent to HK$10.80. BYD Co., a maker of electric vehicles that’s partially owned by billionaire Warren Buffett, advanced 1.8 percent to HK$15.64.

Passenger vehicle sales volume in China may grow 10 percent in October from a year earlier as sentiment improves, Daiwa analyst Jeff Chung wrote in a report dated yesterday.

MGM China Holdings Ltd. (2282) rose 4.3 percent to HK$14.24 after winning a land grant to develop a second casino resort in Macao.

GCL-Poly Energy Holdings Ltd. (3800), a solar-power company, advanced 5.5 percent to HK$1.34 after the Shanghai Securities News reported that China may issue more policies to support the industry.

China’s local-government investment plans probably won’t materialize quickly because they’re reliant on the central government and banks for funding, said Song Guoqing, an adviser to the People’s Bank of China. A strong rebound in growth is unlikely, Song said in a speech at Tsinghua University in Beijing yesterday.

Investment Falls

Foreign direct investment in China fell for the 10th time in 11 months as companies reined in spending amid a slowdown in the world’s second-biggest economy. Spending fell 6.8 percent from a year earlier to $8.43 billion, the Ministry of Commerce said in Beijing today.

A measure of property developers had the biggest drop among the Hang Seng Index’s four industry groups. State-controlled China Resources Land Ltd. slid 1.3 percent to HK$16.96. Evergrande Real Estate Group Ltd., a builder based in the southern city of Guangzhou, declined 2.1 percent to HK$3.26.

China should avoid large profits in the real-estate industry, Shanghai Securities News reported, citing Wang Juelin, a researcher at the Ministry of Housing and Urban-Rural Development. China will continue limits on property purchases for at least the next one to two years, the report cited Wang as saying.

Futures on the Hang Seng Index rose 0.1 percent to 21,558. The HSI Volatility Index (VHSI) fell 4.2 percent to 14.92, the lowest since October 2006. The level indicates traders expect a swing of 4.3 percent for the equity benchmark in 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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