Most Hong Kong stocks gained , with the benchmark index trading near its highest in 10 days, after China ended a floor on borrowing costs.
The Hang Seng Index climbed 0.1 percent to 21,389.01 as of 9:34 a.m. in Hong Kong. About six stocks increased for every five that fell among the 348 members of the Hang Seng Composite Index. The Hang Seng China Enterprises Index of mainland shares, the fourth-worst performing major gauge in the world this year, retreated 0.1 percent to 9,440.86.
The Hang Seng Index last week capped its fourth straight weekly gain as coal producers jumped. The gauge is down 5.7 percent this year through last week, the second-worst performance among 24 developed markets monitored by Bloomberg. Shares slid amid signs China’s growth is slowing and on speculation the Federal Reserve will taper its stimulus.
Materials and energy companies led declines this year on the Hang Seng Composite on speculation demand will weaken amid slower growth in China’s economy. Gauges of information technology, utilities and services were the only measures that rose among the index’s 11 industry groups.
The Hang Seng Financial Index, a subgroup of the broader Hang Seng Composite, increased 0.5 percent today. The People’s Bank of China scrapped the floor on the rates banks can charge customers on July 19 while keeping a cap on deposit rates. The limit on mortgage rates will stay to curb property speculation, the PBOC said. Also unchanged was a 10 percent limit on what banks can offer over PBOC-set deposit rates.
“The lending rate liberalization may improve the market sentiment on reform, but leaves little room for rate cuts and is negative to net interest-margin outlook,” Citigroup Inc. equity strategists Minggao Shen and Ben Wei wrote in a note dated today. “Bank NIMs see no immediate squeeze, but NIM outlook could be under pressure as further liberalization means only higher funding costs for banks.”
Shares on the benchmark Hang Seng Index (HSI) traded at 10.2 times estimated earnings on July 19, compared with 15.4 times for the Standard & Poor’s 500 Index and 13.4 for the Stoxx Europe 600 Index, according to data compiled by Bloomberg.
The Hang Seng China Enterprises Index, also known as the H-share index, fell 23 percent from a Feb. 1 high through last week, meeting some investors’ definition of a bear market. Only major measures in Peru, Brazil and Cyprus have done worse this year in local currency terms. The gauge traded at 1.14 times the value of net assets on July 19, 36 percent below its five-year average of 1.79.
Futures on the S&P 500 added 0.2 percent today. The U.S. equity index gained 0.2 percent on July 19 in New York, as better-than-forecast results from General Electric Co. offset disappointing earnings from Google Inc. and Microsoft Corp. The National Association of Realtors may show today sales of previously owned homes rose to 5.25 million annualized pace in June from 5.18 million the prior month, according to the median forecast of economists.
Hang Seng Index futures increased 0.2 percent to 21,386. The HSI Volatility Index added 2.7 percent to 19.74, indicating traders expect a swing of 5.7 percent for the equity benchmark in the next 30 days.
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