Hong Kong Stocks Advance as China CPI Slows Fourth Month

Hong Kong stocks rose, with the benchmark index closing at the highest level since May, as slowing gains in China’s inflation and industrial production boosted bets for added stimulus to support economic growth.

Agricultural Bank of China Ltd. (1288) added 0.9 percent. Shimao Property Holdings Ltd. paced gains among mainland developers after Poly Real Estate Group Co. reported July contracted sales jumped. SJM Holdings Ltd., the Macau casino operator founded by billionaire Stanley Ho, gained 2.3 percent after reporting a 28 percent increase in first-half profit.

The Hang Seng Index added 1 percent to close at 20,269.47, the highest since May 9. All but eight stocks gained on the 49- member gauge. The Hang Seng China Enterprises Index (HSCEI) of mainland companies rose 1 percent to 9,962.17.

“The market is expecting some type of policy support from the Chinese government to accelerate the economy because momentum is slowing at this point,” said Tim Leung, a portfolio manager who helps manage about $1.5 billion at IG Investment Ltd. in Hong Kong.

The Hang Seng Index fell 6.5 percent from this year’s high on Feb. 29 amid concern global policy measures may fail to revive growth as Europe’s debt crisis spreads. Shares on the gauge trade for 10.7 times estimated earnings on average, compared with 13.6 for the Standard & Poor’s 500 Index and 11.6 for Stoxx Europe 600 Index.

Consumer Prices

China’s consumer prices rose 1.8 percent in July from a year earlier, the National Bureau of Statistics said today in Beijing. The gain compares with the 1.7 percent median forecast in a Bloomberg News survey of 33 economists and a 2.2 percent gain in June. Producer prices fell 2.9 percent from a year earlier, the fifth straight drop, the report showed.

Financial firms accounted for about 43 percent of the advance on the Hang Seng Index. (HSI) Agricultural Bank of China gained 0.9 percent to HK$3.23. Industrial & Commercial Bank of China Ltd., the world’s most profitable lender, added 0.4 percent to HK$4.58.

Separate Chinese reports showed retail sales grew 13.1 percent last month, the slowest pace since January 2007, while industrial production rose less than 10 percent for a fourth month, a level not seen since the 2009 financial crisis.

Mainland passenger-vehicle sales trailed analysts’ estimates for the first time in five months. Wholesale deliveries gained 11 percent to 1.12 million units in July, less than the 1.16 million average estimate of analysts surveyed by Bloomberg.

Mainland Developers

Futures on the Hang Seng Index added 0.9 percent to 20,228. The HSI Volatility Index (VHSI) lost 3.4 percent to 18.47, indicating traders expect a swing of about 5.3 percent for the benchmark index during the next 30 days.

Mainland developers climbed after Poly Real Estate, the No. 2 China-listed builder by market value, reported signed contracts area rose 66 percent in July. China Securities Journal today reported that new property-market control measures may be introduced as soon as this month, including higher transaction taxes on existing home sales.

Shimao Property advanced 4.4 percent to HK$11.98. Country Garden Holdings Co. (2007) added 1 percent to HK$3.03. Guangzhou R&F Properties Co., the biggest builder in the southern Chinese city, climbed 4.5 percent to HK$10.02.

SJM Holdings gained 2.3 percent to HK$15.44 after reporting net income climbed to HK$3.41 billion ($440 million) from HK$2.67 billion a year earlier, aided by higher revenue from mass-market gamblers.

To contact the reporter on this story: Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net

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

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