Hong Kong stocks (HSI) surged, with the Hang Seng Index posting its second-biggest advance since April 2009, after China cut its reserve requirement for lenders as production slows in the world’s second-largest economy.
A gauge of Chinese stocks listed in the city gained by the most since December 2008. Industrial & Commercial Bank of China (601398) Ltd., the country’s largest lender, jumped 11 percent. China Overseas Land & Investment Ltd. (688), the biggest mainland developer listed in Hong Kong, surged 13 percent. HSBC Holdings Plc (HSBA), Europe’s No. 1 bank by market value, climbed 5.6 percent as six central banks made it cheaper for banks to borrow in dollars.
“There’s an increased appetite toward risks,” said John Woods, Hong Kong-based chief Asian strategist at Citigroup Inc.’s private bank. “The easing trend in China is likely to bring some relief to liquidity-starved developers in the mainland.”
The Hang Seng Index climbed 5.6 percent to 19,002.26 at the 4 p.m. close in Hong Kong, its second-biggest increase since April 2, 2009. All but one stock advanced in the 46-member gauge. The measure fell 9.4 percent last month as surging bond yields in Italy and Spain stoked concern Europe’s sovereign-debt crisis is spreading to major economies.
The Hang Seng China Enterprises Index (HSCEI) of mainland companies listed in Hong Kong increased 8.1 percent to 10,281.99, the biggest advance since Dec. 8, 2008.
The HSI Volatility Index dropped 6.9 percent to 28.74, the lowest since Aug. 31, indicating options traders expect a swing of 8.2 percent in the benchmark index over the next 30 days. Futures on the Hang Seng Index advanced 4.8 percent to 18,948.
Shares of financial companies, developers and raw material producers rallied after China’s central bank said yesterday it will trim reserve requirements for banks by 50 basis points effective Dec. 5. The reduction is the first since 2008.
Separately, a survey released today showed Chinese manufacturing contracted for the first time since February 2009.
ICBC jumped 11 percent to HK$4.77. China Construction Bank Corp. (939), the nation’s second-biggest lender, advanced 5.7 percent to HK$5.56. China Overseas Land climbed 13 percent to HK$14.60. Evergrande Real Estate Group Ltd. (3333), China’s second-largest homebuilder by sales, surged 16 percent to HK$3.50.
“The cut in the reserve ratio requirement is significant and signals Beijing is pivoting towards supporting growth,” Stephen Green, Hong Kong-based head of Greater China research at Standard Chartered Plc (STAN), said on Bloomberg Television. “As soon as the banks can lend a bit more, that should feed into the small and medium enterprises. That’s where the economy is beginning to seize up.”
Ping An Insurance Group Inc., China’s second-biggest insurer, jumped 13 percent to HK$57.80, the most in the Hang Seng Index. Jiangxi Copper Co., the nation’s largest producer of the metal, climbed 13 percent to HK$19.30. China National Building Material Co. (3323), the country’s No. 2 cement maker, surged 16 percent to HK$10.18.
Stocks also advanced after six central banks led by the Federal Reserve made it cheaper for commercial banks to borrow dollars overnight in a global effort to ease Europe’s sovereign- debt crisis.
“This should help the markets rise,” said Ryota Sakagami, Tokyo-based chief strategist at SMBC Nikko Securities, a unit of Japan’s second-biggest bank by market value. “The coordinated dollar funding helps to ease concerns about a market collapse because a shortage of liquidity was one of the main things that worsened the 2008 financial crisis.”
HSBC increased 5.6 percent to HK$60.65. Standard Chartered Plc (2888), the London-based lender that gets more than half of revenue in the Asia Pacific, rose 5.7 percent to HK$168.40. Esprit Holdings Ltd. (330), a Hong Kong-based clothier that counts Europe as its biggest market, advanced 5.6 percent to HK$11.34.
The Hang Seng Index declined 18 percent this year amid concern Europe’s debt crisis was worsening. Companies in the index traded at 10.4 times estimated earnings, down from 14.4 times on Dec. 31, according to Bloomberg data. The Standard & Poor’s 500 Index trades at 12.6 times.
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