Bloomberg News

Hong Kong Stocks Climb From Four-Week Low on Bank Shares

November 14, 2012

Hong Kong stocks rose, led by financial shares, after the city’s benchmark index fell to a four-week low yesterday. China’s Communist Party Congress to select new leadership concludes today.

China Construction Bank Corp., the nation’s second-biggest lender by assets, added 3.2 percent after saying it can manage non-performing loans even as the mainland economy slows. Li & Fung Ltd. (494), a supplier of toys and clothes to Wal-Mart Stores Inc., rose 2 percent after a report it may buy Suhyang Networks Co., a South Korean apparel maker. Sands China Ltd. advanced 3.2 percent after the Macau casino operator was rated outperform at Oppenheimer & Co. Inc.

The Hang Seng Index (HSI) added 1.2 percent to 21,441.99 as of the trading close in Hong Kong after closing yesterday at the lowest level since Oct. 15. More than three stocks rose for each that fell, with trading volume 26 percent below the 30-day average for the time of day. The Hang Seng China Enterprises Index (HSCEI) of mainland companies gained 1.7 percent to 10,405.76 after dropping 2 percent yesterday.

“The Chinese economy will pick up soon,” said Patrick Yiu, managing director at Cash Asset Management Ltd., which oversees HK$100 million ($12.9 million). “If the economy in China can’t improve, I think there will be further downside risks for Hong Kong and Chinese stock markets because investors think the worst is over in the Chinese economy.”

The benchmark Hang Seng gauge advanced 17 percent from this year’s low on June 4 through yesterday as economic data showed China’s slowdown may be bottoming and central banks around the globe added stimulus to spur growth. The index traded at 11.1 times estimated earnings, compared with 13.2 for the Standard & Poor’s 500 Index and 12.1 for the Stoxx Europe 600 Index, according to data compiled by Bloomberg.

China Congress

Vice President Xi Jinping and Vice Premier Li Keqiang were reappointed to the Chinese Communist Party’s Central Committee, positioning them to take over the top posts in the world’s second-biggest economy. Xi is expected tomorrow to become general secretary of the 82 million-member party at the end of a congress meeting tomorrow.

Financial shares gained the most among the Hang Seng Index’s industry groups. China Construction Bank rose 3.2 percent to HK$5.84 after Financial News reported the lender said it will improve risk controls and speed disposal of bad loans.

Industrial & Commercial Bank of China Ltd., the world’s most profitable lender, increased 3 percent to HK$5.11. Agricultural Bank of China Ltd. climbed 3.1 percent to HK$3.37.

Li & Fung advanced 2 percent to HK$13.06. Maeil Business Newspaper reported the retail supplier has completed due diligence on Suhyang Networks and is negotiating to buy the clothier for 200 billion won ($184 million).

Sands China Climbs

Sands China advanced 3.2 percent to HK$30.70. Oppenheimer initiated coverage of the stock with an outperform rating, saying it’s the only Macau gaming company adding capacity before 2015, which should help it gain market share.

Futures on the S&P 500 gained 0.6 percent today. The U.S. equity benchmark fell 0.4 yesterday as concern about the federal budget debate reversed an intraday rally.

The HSI Volatility Index (VHSI) dropped 5 percent to 16.39, indicating traders expect a 4.7 percent swing in the equity benchmark in the next 30 days. Futures on the Hang Seng Index rose 1.2 percent to 21,419.

Of the 49 companies on the Hang Seng Composite Index that have reported quarterly earnings since Oct. 1 and for which estimates are available, 57 percent missed expectations, according to data compiled by Bloomberg.

To contact the reporter on this story: Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net

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


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