Hong Kong's Stocks Advance on Yuan Changes; Property Developers Lead Gains
Hong Kong stocks rose for a ninth day, the longest winning streak in four years, after China allowed the yuan to appreciate against the U.S. dollar, making the city’s assets more affordable to mainland investors.
Hang Lung Properties Ltd., a Hong Kong developer, rallied 6 percent. China Resources Land Ltd., a state-controlled property company, surged 4.4 percent. The Hang Seng Property Index’s 4.1 percent advance was the sharpest among the four industry groups tracked by the Hang Seng Index. Air China Ltd., the world’s biggest airline by market value, gained 6 percent.
The Hang Seng Index jumped 3.1 percent to 20,912.18, the highest close since April 30. The gauge has increased 7.9 percent in the past nine days, the longest run of gains since the 10 trading days to Feb. 27, 2006. The streak four years ago came amid optimism that a cycle of interest-rate increases in Hong Kong was coming to an end.
“This announced policy is a paradigm change, of which impacts are long term, thus financial markets will be re-rating Chinese stocks for long term attractiveness,” said Lei Wang, who helps oversee $20.2 billion at the New Mexico-based Thornburg International Value Fund. “I have been expecting this RMB paradigm change, and our Chinese stock exposures have already taken that as one of our long-term assumptions. In the short term, airlines and financial stocks on the Hong Kong market will benefit most.”
The Hang Seng China Enterprises Index of Chinese companies’ so-called H-shares surged 4.4 percent to 12,134.42, the largest gain since June 10 last year.
China’s yuan climbed the most in 18 months against the dollar after the People’s Bank of China said it would allow the currency greater flexibility to move, boosting prospects for nations who sell products to the world’s third-largest economy.
The central bank indicated it’s abandoning the 6.83 yuan peg to the dollar adopted to shield exporters during the global financial crisis. American lawmakers had argued that the yuan peg was an unfair subsidy for China’s exporters. A stronger yuan may allow policymakers the ability to stanch inflation without restraining the economy.
The Hong Kong Monetary Authority said it sees no need to change the Hong Kong dollar’s peg to the U.S. dollar. The HKMA said June 15 that local stock and property prices may be driven higher once China allows the yuan to resume gains as the city becomes more affordable to mainland investors.
China Resources Land advanced 4.4 percent to HK$16.30. China Overseas Land & Investment Ltd., a developer controlled by the nation’s construction ministry, rallied 5.2 percent to HK$16.60.
Property Gauge Leads
Hang Lung surged 6 percent to HK$31.15. Henderson Land Development Co., controlled by billionaire Lee Shau-kee, rose 3.4 percent to HK$47.75.
China Unicom (Hong Kong) Ltd., the country’s second-biggest wireless carrier, surged 9.1 percent to HK$10.48, the largest gain on the Hang Seng Index. Ping An Insurance (Group) Co., China’s No. 2 insurer, advanced 6.5 percent to HK$66.75. The stock was rated “overweight” by JPMorgan.
Air China rallied 6 percent to HK$8.49. China Southern Airlines Co., the nation’s biggest carrier, jumped 6.5 percent to HK$3.75.
China’s airlines are major beneficiaries of a gain in the yuan given their foreign-currency debt, said Jing Ulrich, Hong Kong-based chairwoman of China equities and commodities at JPMorgan Chase & Co.
Hang Seng Bank
The Hang Seng Index has dropped 4.4 percent this year as worries about budget deficits in Europe and credit tightening by China dented confidence in the strength of the global economy. Shares on the benchmark index are priced at an average 13.8 times estimated earnings, down from 18 times on Nov. 16, the highest level in 2009, data compiled by Bloomberg show.
Hang Seng Bank Ltd., controlled by HSBC Holdings Plc, climbed 1.1 percent to HK$105.40. The bank plans to raise the pretax-profit contribution from corporate and commercial banking to 30 percent in two years from 22.9 percent in 2009, Ming Pao Daily News reported.
The bank is trying to attract enterprises in China and is bolstering relationships with state-owned companies, the paper quoted Deputy General Manager Nixon Chan as saying.
Costin New Materials Group Ltd. fell 0.8 percent to HK$2.36 on its debut, after climbing as much as 5 percent. The fabric producer sold 240 million shares at HK$2.38 each, raising net proceeds of HK$441.5 million ($56.8 million) according to a statement.
June futures on the Hang Seng Index rose 2.9 percent to 20,962. All but two stocks advanced among the measure’s 43 constituents.