Hong Kong Stocks Rise on China Market Integration Plans

Hong Kong stocks rose, with the Hang Seng Index (HSI) heading for a second day of advance, as China plans to boost the city’s integration with mainland financial markets during Chinese President Hu Jintao’s visit this week.

China Overseas Land & Investment Ltd. (688), the biggest Chinese homebuilder traded in Hong Kong, gained 2.7 percent amid speculation China will do more to boost economic growth. Chow Tai Fook Jewellery Group Ltd., a Hong Kong-based chain with more revenue than Tiffany & Co., climbed 5.2 percent after posting higher full-year profit. Glencore International Plc fell 1.5 percent, an eighth day of decline, after Qatar Holding LLC asked the world’s largest publicly traded commodities supplier to raise its offer for Xstrata Plc.

“Some people are excited about the news of so-called gifts from China for the 15th anniversary of the hand-over” of Hong Kong to the mainland, Alex Au, managing director of Richland Capital Management Ltd. in Hong Kong, which oversees about $250 million of assets. “Those new policies are not really anything exciting. The market is overreacting.”

Hong Kong’s Hang Seng Index rose 1.1 percent to 19,190.26 as of the midday trading break in the city, erasing losses of as much as 0.2 percent. The measure retreated about 12 percent from this year’s high in February through yesterday amid concern that growth in the U.S. and China will be slower than estimated, and as Europe’s sovereign-debt crisis spread from Greece to Spain and Italy.

Bourse Cooperation

The Hang Seng China Enterprises Index (HSCEI) of Chinese companies listed in Hong Kong gained 1.2 percent to 9,512.48. China plans to strengthen cooperation among bourses in the mainland and the Chinese city, Xinhua reported today, citing a statement from the State Council. The anniversary of Hong Kong’s return to China is on July 1.

“It’s not a game changer,” said Pauline Dan, Hong Kong- based chief investment officer at Samsung Asset Management Co., which manages $100 billion. “It may be positive for some corporations in Hong Kong but ultimately it doesn’t solve the problems we’re facing in the world today. Valuation are cheap, but I don’t see the broader market turning around just yet.”

Chinese developers and lenders advanced after the Shanghai Securities News reported the central bank may cut the reserve ratio requirement for banks next month. Separately, the China Securities Journal said in a commentary that the government may introduce “more proactive” policies to ensure stable growth.

Losses in the Hang Seng Index dragged the valuation of the shares on the gauge to 9.8 times estimated earnings on average yesterday, compared with 12.7 times for S&P 500 Index and 10.2 for the Stoxx Europe 600 Index.

Futures on Hong Kong’s benchmark stock index expiring this month gained 1 percent to 19,211. The HSI Volatility Index (VHSI) fell 1.4 percent to 20.6, indicating options traders expect a swing of about 5.9 percent on the gauge during the next 30 days.

To contact the reporters on this story: Jonathan Burgos in Singapore at jburgos4@bloomberg.net; Kana Nishizawa in Hong Kong at knishizawa5@bloomberg.net

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

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