Most Hong Kong Stocks Climb on Stimulus Bets

(Corrects name of phone company in second paragraph.)

Most Hong Kong stocks rose, extending last week’s gains, amid speculation central banks will take more steps to boost economic growth amid signs of slowing expansion in China and abroad.

ZTE Corp. (763) rose 6.1 percent after a report the equipment manufacturer is among winners of tender to make China Mobile Communications Corp.’s fourth-generation mobile phones. Pacific Basin Shipping Ltd., a dry-bulk ship operator, gained 4.4 percent after agreeing to sell its fleet of roll-on, roll-off ships. China Coal Energy Co. pared its increase to 0.5 percent after August export growth missed economists’ estimates.

About five stocks rose for every three that fell on the Hang Seng Composite Index (HSCI), the city’s broadest gauge of stock performance. China’s President Hu Jintao said the economy faces “notable downward pressure,” signaling the country may add to road and rail projects announced last week. The U.S. Federal Reserve meets this week to discuss whether to expand asset purchases, known as quantitative easing.

“People are quite bullish because the prospect of QE3 in the U.S. and the bond buying by the European Central Bank are supportive,” said Alex Wong, asset-management director at Ample Asset Management Ltd. in Hong Kong. “For China, people are not concerned because the government is finally doing something to try and stimulate the economy.” In Hong Kong, the “accumulated short interest in the market is huge so we would probably be in the phase of short covering for a while.”

The Hang Seng Index dropped less than 0.1 percent to 19,792.11 as of 2:45 p.m. local time, after rising as much as 0.4 percent. The Hang Seng China Enterprises Index of mainland companies, or the H-share index, slipped 0.4 percent to 9,392.89.

Short Selling

The total short selling by value on Hong Kong’s mainboard rose 37 percent last week to HK$6.78 billion ($874 million), according to data compiled by Bloomberg.

The Hang Seng Index (HSI) traded at 10.6 times estimated earnings on average, compared with 9.8 for the Shanghai Composite Index and 13.9 for the Standard & Poor’s 500 Index. (SPXL1) The Hong Kong gauge climbed 8.9 percent from this year’s low on June 4 through Sept. 7 amid optimism central banks will take more steps to boost the slowing economies.

Futures on the Standard & Poor’s 500 Index fell 0.3 percent today, ahead of this week’s Fed policy meeting. The underlying index gained 0.4 percent on Sept. 7 amid stimulus bets after Labor Department figures showed that U.S. nonfarm payrolls increased by 96,000 in August, less than the median estimate of 130,000 in a Bloomberg survey of economists. Fed Chairman Ben S. Bernanke said on Aug. 31 that the weak jobs market posed a “grave concern.”

China Output

“Following the weak U.S. jobs report, the backdrop is ideal to act this week and deliver more quantitative easing,” said George Boubouras, Melbourne-based head of investment strategy at UBS AG’s Australian wealth management unit. The Swiss bank has about $1.5 trillion in assets under management. “This week is looking like the last window for the Fed to act,” before the U.S. election.

China’s biggest lenders were the heaviest drags on the Hang Seng Index today, with China Construction Bank Corp. slipping 2.3 percent and Industrial & Commercial Bank of China Ltd., the world’s No. 1 lender by market value, dropping 2.3 percent.

In China, industrial output grew at the slowest pace in three years. Production increased 8.9 percent in August from a year earlier and fixed-asset investment growth in the first eight months eased to 20.2 percent, the National Bureau of Statistics said yesterday in Beijing.

Exports rose 2.7 percent in August from a year earlier while imports fell 2.6 percent, resulting in a trade surplus of $26.7 billion, the customs bureau said today in Beijing. The increase in overseas shipments compares with the median estimate for 2.9 percent growth from analysts in a Bloomberg News survey. Economists forecast import gains of 3.5 percent and a trade surplus of $19.5 billion.

“China is also supportive because they are spending money on infrastructure again, that’s another factor making people happy,” said Ample Asset Management’s Wong.

Futures on the Hang Seng Index retreated 0.3 percent to 19,803. The HSI Volatility Index (VHSI) climbed 0.2 percent to 18.74, indicating traders expect a swing of 5.4 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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