Hong Kong Stocks Rise, Led by Steelmakers, on Merger Speculation

Hong Kong stocks advanced, paring yesterday’s drop, on speculation inflation in China is slowing and as higher commodity prices and a plan to boost mergers in the steel industry lifted metal producers.

Angang Steel Co. and Maanshan Iron & Steel Co. jumped at least 4.4 percent after China’s Ministry of Industry and Information Technology reiterated a proposal to combine large domestic steelmakers and leave three to five large players. Little Sheep Group Ltd. (968), which runs a hot-pot restaurant chain, surged 15 percent after Yum! Brands Inc.’s takeover of the company was given anti-monopoly clearance from China’s Ministry of Commerce.

The Hang Seng Index gained 0.7 percent to 19,804.91 at the midday-trading break in Hong Kong. The Hang Seng China Enterprises Index of mainland companies listed in Hong Kong rose 1.4 percent to 10,797.89. The MSCI Asia Pacific Index swung between gains and losses ahead of a parliamentary vote in Italy that will show whether Prime Minister Silvio Berlusconi has enough support to stay in power.

“The perception in equity markets is that something is going to work out, it’s going to be fine,” Viktor Shvets, a Hong Kong-based strategist at Samsung Securities Co., told Susan Li on Bloomberg Television’s “First Up.” “This is just a bear market bounce.”

About five stocks rose for every three that fell in the Hang Seng Composite Index. The gauge of Hong Kong equities has fallen 15 percent this year, sending its valuation to 9.3 times reported earnings, according to data compiled by Bloomberg.

China Food, Steel

China’s October food prices may have fallen 0.4% from September, the first drop since June, the Shanghai Securities News reported today, citing Guotai Junan Securities Co. A report tomorrow may show consumer prices rose 5.5 percent in October from a year earlier, compared with 6.1 percent in September, according to the median estimate of economists surveyed by Bloomberg.

Angang Steel, the biggest Hong Kong-listed Chinese steelmaker, climbed 7.1 percent to HK$5.70. Maanshan Iron & Steel (323) increased for a fifth day, rising 4.4 percent to HK$2.63.

China plans to add more than 100 million tons of new overseas iron ore capacity by 2015, according to a steel industry plan posted on the website of the Ministry of Industry and Information Technology yesterday.

Zijin Mining Group Co., China’s biggest gold producer by market value, jumped 5.9 percent to HK$3.79. The company said it would pay more than $200 million to Jinchuan Group Ltd. for a 45 percent stake in a copper and gold mine in Tibet.

Little Sheep

China Gold International Resources Corp., which explores for the metal in Asia, rose 4.4 percent to HK$26. Bullion for immediate-delivery fell as much as 0.3 percent to $1,790.38 an ounce today. It touched $1,798.65 yesterday, the most expensive since Sept. 21.

Little Sheep advanced 15 percent to HK$6.37. Yum, the owner of the KFC and Pizza Hut fast-food chains, is seeking to delist Little Sheep by offering HK$6.5 a share in an all-cash deal that would give Yum 93 percent of the company.

Shengli Oil & Gas Pipe Holdings Ltd. surged 19 percent to 89 Hong Kong cents for the biggest advance in the Hang Seng Composite Index. The producer of oil and gas pipelines said it expects to post a “significant” gain in second-half profit.

Futures on the Hang Seng Index (HSI) that expire this month rose 1 percent to 19,790. The Hang Seng Volatility Index fell 6.2 percent to 34, indicating options traders exect a swing of 9.7 percent in the gauge in the next 30 days.

To contact the reporter on this story: Lynn Thomasson in Hong Kong at lthomasson@bloomberg.net

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

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