Hong Kong stocks rose, reversing earlier losses, as Chinese financial companies extended gains, offsetting declines among exporters.
Bank of China Ltd. (3988) and Ping An Insurance Group Co. led the advance among Chinese financial companies on speculation the industry will benefit from government moves to ease lending curbs and stimulate the economy. Yue Yuen Industrial Holdings Ltd. (551), a Nike Inc. shoe supplier that gets about 30 percent of sales from the U.S., fell 1.3 percent after an unexpected rise in the number of Americans filing for jobless benefits.
“A lot of the potential downside has been priced in,” said Andrew Sullivan, principal sales trader at Piper Jaffray Asia Securities Ltd. in Hong Kong. “Its hard to tell whether valuations have reached the trough until we know what’s going on in Europe.”
The Hang Seng Index gained 0.2 percent to 19,040.39 as of the 4 p.m. close in Hong Kong, erasing losses of as much as 0.7 percent. The measure advanced 7.6 percent this week as China lowered reserve requirements and the Federal Reserve led five other central banks in cutting the cost of emergency funding for European lenders. The gauge plunged 9.4 percent in November.
The Hang Seng China Enterprises Index (HSCEI) of mainland companies listed in Hong Kong advanced 0.7 percent to 10,350.51 after surging yesterday by the most since December 2008.
Chinese financial stocks extended gains for a second day before the 50 basis points cut in reserve ratio requirements for lenders takes effect on Dec. 5. China’s money-market rate dropped to the lowest level in more than two weeks on speculation the central bank will add more cash to the financial system to help sustain economic growth.
Bank of China, the nation’s fourth-largest lender by market value, climbed 4.5 percent to HK$2.78. Bigger rival China Construction Bank Corp. rose 1.6 percent to HK$5.65. Ping An, the country’s second-largest insurer, gained 4.4 percent to HK$60.35.
Makers of industrial machinery advanced after a report showed U.S. manufacturing expanded in November at the fastest pace in five months and automotive sales in the world’s biggest economy accelerated.
Sinotruk Hong Kong Ltd. (3808), China’s biggest maker of heavy-duty trucks, advanced 1.9 percent to HK$4.28. Weichai Power Co., the maker of diesel engines used in heavy-duty vehicles, gained 1.6 percent to HK$38.70. Johnson Electric Holdings Ltd. (179), a maker of micromotors which gets 19 percent of sales from the U.S., added 1 percent to HK$4.20.
The Hang Seng Index (HSI) has tumbled 18 percent this year through yesterday amid concern Europe’s debt crisis was worsening. Companies in the index traded at 10.3 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.
Exporters dropped as a report on U.S. jobless claims signaled limited recovery in the world’s biggest economy. The International Monetary Fund will probably lower its growth forecasts next month as the European debt crisis rocks financial markets and slows output, a spokesman said yesterday. A survey showed China’s manufacturing posted its weakest performance since 2009 last month.
Yue Yuen dropped 1.3 percent to HK$22.90. Techtronic Industries Co. (669), a maker of power tools that counts North America as its largest market, declined 1.2 percent to HK$7.21.
Belle International Holdings Ltd., a retailer of women’s shoes and sportswear, sank 6.6 percent to HK$14.22 after an investor sold HK$1 billion ($129 million) of shares at a discount. A shareholder sold 70 million shares at HK$14.60 each, according to people with knowledge of the transaction. They declined to be identified as the transaction is private.
Futures on the Hang Seng Index rose 1.4 percent to 19,194. The HSI Volatility Index dropped 3.5 percent to 27.74, indicating options traders expect a swing of about 8 percent in the benchmark index over the next 30 days.
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