Hong Kong Stocks Advance as Greece Bailout Tempers Rising Oil

Hong Kong stocks rose, erasing earlier losses, as an agreement to secure a second bailout for Greece overshadowed concern that rising oil prices threaten corporate earnings.

HSBC Holdings Plc, Europe’s biggest lender by market value, climbed 1.3 percent. Wharf Holdings Ltd. slipped 1.1 percent after jumping 6 percent last week. Air China Ltd. (753), the world’s largest airline by market value, slipped 1.6 percent on speculation rising fuel costs will crimp earnings.

The Hang Seng Index added 0.3 percent to 21,478.72 as of the 4 p.m. close in Hong Kong, reversing losses of as much as 1 percent. The gauge rose to a six-month high on Feb. 17. The Hang Seng China Enterprises Index of mainland companies listed in Hong Kong gained 0.2 percent to 11,689.69.

“Valuations remain attractive despite recent strong gains,” said Castor Pang, head of research at Core-Pacific Yamaichi International Ltd. in Hong Kong. “Investors are reluctant to put more money in the market as short-term indicators show the market is overbought. Even with a Greek bailout deal, there are still many variables in Europe, particularly with regard to refinancing for Italy and Spain.”

HSBC, Esprit

Euro-area leaders today reached agreement on a second bailout package for Greece that is vital to staving off a default next month. The deal includes a 53.5 percent writedown for investors in Greek bonds, Luxembourg’s Jean-Claude Juncker, who led a meeting of finance ministers in Brussels, told reporters early this morning.

HSBC gained 1.3 percent to HK$71.70. Esprit Holdings Ltd. (330), the Hong Kong-based clothier that counts Europe as its biggest market, rose 1.5 percent to HK$14.62.

The benchmark Hang Seng Index gained last week for a seventh week, the longest such winning streak since the period ended Oct. 15, 2010. The rally drove the gauge’s 14-day relative strength index, a measure of momentum, to about 74 on Feb. 17, exceeding the threshold of 70 that indicates to some traders it’s overbought.

Wharf Holdings, the fourth best performer in the Hang Seng Index (HSI) this year, slipped 1.1 percent to HK$47.65. Hang Lung Properties Ltd. (101), Hong Kong’s third-largest developer by market value, dropped 1.7 percent to HK$29.35 after climbing 8 percent last week.

Transport Companies

The Hang Seng Index climbed 16 percent this year through Feb. 20 amid signs the U.S. economy is improving and on optimism Europe will contain its debt crisis. Shares in the gauge traded at 10.9 times estimated earnings, compared with 13 times for the Standard & Poor’s 500 Index and 11 times for the Stoxx Europe 600 Index.

Transport companies declined after crude oil traded near a the highest price in nine months, sparking concern corporate profits will be hurt.

Air China declined 2 percent to HK$6.02. Cathay Pacific Airways Ltd., Hong Kong’s biggest carrier, fell 1.9 percent to HK$15.26. China Cosco Holdings Co. (1919), the nation’s largest shipping line, decreased 3.3 percent to HK$5.02.

Futures on the Hang Seng Index expiring this month gained 0.4 percent to 21,439. The HSI Volatility Index (VHSI) declined 3.5 percent to 23.01, indicating options traders expect a swing of 6.6 percent in the benchmark index over the next 30 days.

To contact the reporter on this story: Jonathan Burgos in Singapore at jburgos4@bloomberg.net

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

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