Hong Kong Stocks Swing From Gains, Losses on ECB, China

Hong Kong stocks swung between gains and losses as investors await a European Central Bank announcement on its bond-buying program today, and amid signs China’s economic slowdown is deepening.

Esprit Holdings Ltd. (330), a clothier that counts Europe as its largest market, rose 2.2 percent. CSR Corp., a Chinese train maker, jumped 8.8 percent, pacing gains among rail companies after the government approved subway projects. Brilliance China Automotive Holdings Ltd., a partner of Bayerische Motoren Werke AG, slumped 8.7 percent after saying its controlling shareholder will sell a stake in the company.

The Hang Seng Index was little changed at 19,147.64 as of 1:44 p.m. local time, after rising as much as 0.3 percent and dropping 0.4 percent. About the same number of stocks rose as fell in the 49-member gauge. Volume was 15 percent above its 30- day average for the time of day. The Hang Seng China Enterprises Index of mainland companies climbed at 9,038.12.

“The market is waiting for more news to come out from the ECB meeting,” said Linus Yip, a Hong-based strategist at First Shanghai Securities. “The consensus is that the ECB will try to buy bonds, what matters is the amount. In China, there are talks about another hard landing. The economy is slowing, but there are a lot of tools the government can use to stabilize the economy.”

The Hang Seng Index (HSI) traded at 10.2 times estimated earnings on average yesterday, compared with 9.3 for the Shanghai Composite Index and 13.6 for the Standard & Poor’s 500 Index. (SPXL1) The Hong Kong gauge dropped 5.7 percent, or more than 1,000 points, from its recent high on Aug. 14 through yesterday. Shares slid amid concern demand will slow as economic reports signaled weakness in the global economy.

U.S. Futures

“Technical indicators are showing Hong Kong stocks are being oversold,” Yip said.

Futures on the S&P 500 rose 0.2 percent today. The index fell 0.1 percent in New York yesterday as London-based Markit Economics said euro-area services and manufacturing contracted more than initially estimated in August.

ECB President Mario Draghi’s bond-buying proposal involves unlimited purchases of government debt that will be sterilized to assuage concerns about printing money, two central bank officials briefed on the plan said. Draghi will hold a press conference after the ECB announces its interest-rate decision later today.

Esprit gained 2.2 percent to HK$12.26, while Cosco Pacific Ltd. (1199), a shipping company which operates a port terminal in Greece, advanced 2 percent to HK$9.75.

China Growth

In China, the government said yesterday that industrial output will expand by about 10 percent this year, lowering its sights from an 11 percent goal given in December after weaker- than-anticipated domestic and overseas demand. Separately, Goldman Sachs Group Inc. cut its estimate for China’s 2012 gross domestic product growth to 7.6 percent from 7.9 percent and reduced its 2013 forecast to 8 percent from 8.5 percent.

CSR rose 8.8 percent to HK$5.20. China Railway Group Ltd. (390), the nation’s largest construction company by total assets, climbed 7.4 percent to HK$3.18 while China Railway Construction Corp. increased 6.5 percent to HK$6.39.

China’s National Development and Reform Commission approved plans for subways in 18 cities including Suzhou, Hangzhou, Guangzhou, Tianjin and Shenzhen, the agency said on its website yesterday.

‘Meaningful Impact’

“Beijing is stepping up efforts to speed up infrastructure investment,” HSBC economists Hongbin Qu and Junwei Sun wrote in a report dated today. “This has a meaningful impact on growth, though the form of easing is of a relatively low profile. Once started, these projects are likely to filter through the economy quickly, given the strong track record of previous large stimulus packages.”

Brilliance China (1114) slumped 8.7 percent to HK$6.89 after resuming trading today. The company’s controlling shareholder Huachen Automotive Group Holdings Co. will sell 125 million stake in the company at HK$7.17 each, a discount to yesterday’s closing price of HK$7.55, Brilliance said in a statement to the city’s stock exchange.

Futures on the Hang Seng Index climbed 0.2 percent to 19,098. The HSI Volatility Index (VHSI) declined 1.2 percent to 20.47, indicating traders expect a swing of 5.9 percent for the equity benchmark in the next 30 days.

To contact the reporter on this story: 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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