Hong Kong stocks rose, reversing earlier losses, on speculation China’s central bank will ease monetary policy and as railway builders surged.
Industrial & Commercial Bank of China (601398) Ltd., the nation’s biggest lender by market value, rose 4 percent after mainland money-market rates fell the most in three weeks on speculation the central bank will add funds to the system. Jiangxi Copper Co. jumped 4.9 percent after metal prices climbed. China Railway Construction Corp., a builder of the nation’s rail links, surged 11 percent after a Xinhua report said the rail ministry will get a cash injection of more than 200 billion yuan ($31 billion).
The Hang Seng Index rose 1.9 percent to 19,733.71 at the close, after earlier declining as much as 1.8 percent amid heightened concern Europe’s bailout of debt-ridden Greece will unravel. All but seven stocks gained in the 46-member gauge. The Hang Seng China Enterprises Index of Chinese companies listed in Hong Kong rose 2.6 percent to 10,445.85.
“A loosening of monetary policy in China could support the stock market,” said Hong Kong-based Michiya Tomita, who helps oversee about $65 billion for Mitsubishi UFJ Asset Management Co. “Any gains may not be sustainable as uncertainties in Europe persist. Investors are taking a wait-and-see attitude.”
The Hang Seng Index (HSI) tumbled 14 percent this year amid concern Europe’s debt crisis, China’s monetary tightening measures and a slowdown in U.S. growth will derail the global economic recovery. Companies on the index traded at 10.7 times forecast earnings at the last close, around March 2009 levels. That compares with 12.3 times for the Standard & Poor’s 500 Index.
ICBC jumped 4 percent to HK$4.94, while China Minsheng Banking Corp., the nation’s first non-state lender, gained 5.8 percent to HK$6.37. China Construction Bank Corp. (939), the nation’s No. 2 lender by market value, rose 3 percent to HK$5.83.
A gauge of interbank funding availability in China, dropped 70 basis points to 3.70 percent as of 10:34 a.m. in Shanghai, the biggest decline since Oct. 12, according to a weighted average compiled by the National Interbank Funding Center. It has fallen 210 basis points, or 2.10 percentage points, from a three-month high of 5.8 percent on Oct. 31.
The People’s Bank of China may inject capital this week to support the economy, according to Wang Huane, a senior bond trader at Qilu Bank Co.
Shares in the region declined yesterday as China’s Purchasing Managers’ Index fell to 50.4 in October from 51.2 in September. The result was lower than estimates by all 16 economists in a Bloomberg News survey. A reading above 50 indicates expansion.
“People reckon China’s PMI was a weaker number, and expect some loosening coming out of China,” said Alex Wong, an asset- management director at Ample Capital Ltd. in Hong Kong. “People expect inflation to peak.”
Jiangxi Copper, China’s No. 1 producer of the metal, gained 4.9 percent to HK$19.18, while Aluminum Corp. of China Ltd., the mainland’s biggest producer of aluminum, jumped 6.3 percent to HK$4.36. Copper for three-month delivery rose as much as 3.1 percent today on the London Metal Exchange. Aluminum gained 1.6 percent.
Railway shares advanced after the Xinhua News Agency reported China’s railway ministry will get more than 200 billion yuan of financial support to ensure payments on dues and improve liquidity, citing unidentified people at the ministry. The extra funding will help the ministry pay debts at suppliers and ease a cash crunch that has hampered construction, Xinhua said.
China Railway Construction surged 11 percent to HK$5.36. China Railway Group Ltd. (390), a builder of train lines, jumped 9 percent to HK$2.92.
Futures on the Hang Seng Index rose 2.4 percent to 19,763. The HSI Volatility Index fell 0.5 percent to 35.17, indicating options traders expect a swing of 10 percent in the Hang Seng Index in the next 30 days.
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