Bloomberg News

Hang Seng China H-Share Index Enters Bull Market on U.S.

November 02, 2012

Hong Kong shares rose, with an equity gauge of mainland companies entering a bull market, after U.S. employment and manufacturing data beat estimates and consumer confidence rose, adding to signs the world’s largest economy is weathering a global slowdown.

Man Wah Holdings, a furniture maker that gets 51 percent of its sales in the U.S., gained 1.5 percent. Hengdeli Holdings Ltd. led retailers higher on a report that Hong Kong sales grew in September. Sands China Ltd. (1928), the Macau casino operator controlled by billionaire Sheldon Adelson, gained 6.3 percent after third-quarter profit rose.

The Hang Seng China Enterprises Index of mainland companies, also known as the H-share index, added 1.2 percent to 10,833.73 at close of trading in Hong Kong. The measure is up more than 20 percent from a Sept. 5 low, indicating the start of a bull market. The benchmark Hang Seng Index (HSI) gained 1.3 percent to 22,111.33, its highest since August 2011, rising 2.6 percent this week. Trading volume on the gauge was 19 percent above the 30-day average.

“There were certainly some slightly more encouraging signs with respect to data points,” said Peter Elston, Singapore- based head of Asia-Pacific strategy at Aberdeen Asset Management, which oversees about $270 billion. “It seems we have an interesting battle going on between weakening fundamentals and a deteriorating profit picture on one hand and very supportive monetary policy on the other.”

China Rally

The Hang Seng China Enterprises Index (HSCEI) has rallied on speculation the nation’s economy may be stabilizing and as central banks across the globe add stimulus to prop up growth. The 40-member gauge traded at nine times average estimated earnings, compared with 13.7 for the Standard & Poor’s 500 Index and 12.3 for the Stoxx Europe 600 Index, according to data compiled by Bloomberg.

China’s central bank cut interest rates in June and July for the first time since 2008 and reduced banks’ reserve requirements three times since November to boost the economy.

Futures on the S&P 500 were little changed today after the index gained 1.1 percent yesterday after private report showed U.S. payrolls expanded in October and as the Institute for Supply Management’s U.S. factory index rose from a month earlier. The Conference Board’s consumer sentiment index increased to 72.2, the highest since February 2008.

Stocks linked to the U.S. advanced. Man Wah gained 1.5 percent to HK$4.84. Li & Fung Ltd. (494), a supplier of toys and clothes to Wal-Mart Stores Inc., rose 0.6 percent to HK$13.18.

U.S. Jobs

The U.S. Labor Department is scheduled to reports jobs data today, the last monthly data before the U.S. presidential election on Nov. 6. Payrolls probably rose by 125,000 workers in October, and the jobless rate increased to 7.9 percent from a three-year low of 7.8 percent reached in September, according to the median forecast of economists surveyed by Bloomberg.

Hong Kong retailers advanced after the city reported a 9.4 percent increase in retail sales by value in September from a year earlier. Hengdeli surged 9.6 percent to HK$2.86, the biggest advance since Aug. 22. Apparel-maker Ports Design Ltd. added 5.1 percent to HK$5.94.

Sands China gained 6.3 percent to HK$31.90 after posting a profit increase as spending by middle-class Chinese gamblers boosted earnings.

The HSI Volatility Index (VHSI) dropped 0.4 percent to 15.80, indicating traders expect a 4.5 percent swing in the equity benchmark in the next 30 days. Futures on the Hang Seng Index rose 1.2 percent to 22,110.

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


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