Hong Kong Stocks Rise to 16-Month High as Insurers Gain

Hong Kong stocks rose, with the benchmark index closing at its highest level since August 2011, after China’s government allowed insurers to invest more in banks and after the nation’s new leaders pledged to maintain growth and promote “urbanization.”

Ping An Insurance (Group) Co. rose 4.9 percent as HSBC Holdings Plc (HSBA) said it agreed to sell its stake in China’s second- biggest insurer. Industrial & Commercial Bank of China Ltd., the world’s largest lender by market value, climbed 2.5 percent. China Resources Land Ltd. (1109), a state-controlled developer, gained 2.5 percent. Bank of East Asia Ltd. (23), Hong Kong’s largest family- run lender, advanced 2.2 percent after agreeing to sell new stock to Japan’s Sumitomo Mitsui Banking Corp.

The Hang Seng Index (HSI) rose 2.2 percent to 22,270.91, its highest close since Aug. 2, 2011. All companies in the 49-member gauge advanced, with trading volume 77 percent above the 30-day average for the time of day, according to data compiled by Bloomberg. The Hang Seng China Enterprises Index of mainland companies climbed 2.9 percent to 10,830.04, the biggest gain since September 14.

“There’s a lot of talk about potential policy support for China’s economy,” said Tim Leung, a fund manager who helps manage about $1.5 billion at IG Investment Ltd. “While urbanization is not new, people will probably be focusing on that trend. There’s a lot of positive benefit from urbanization, like infrastructure spending.”

Relative Value

Hong Kong’s benchmark index advanced 20 percent through yesterday from this year’s low on June 4 as central banks added stimulus and China and the U.S. showed signs of economic recovery. Shares on the measure traded at 11.4 times average estimated earnings yesterday, compared with 13.5 for the Standard & Poor’s 500 Index and 12.5 for the Stoxx Europe 600 Index, according to data compiled by Bloomberg.

“The Hang Seng Index may surpass the key resistance level of 22,200 from capital inflow into Hong Kong and the likely bottoming out of China’s economy,” said Patrick Yiu, associate director at Cash Asset Management Ltd. in Hong Kong. “It’s giving a clear and better picture for investors to invest in Hong Kong. The Hang Seng Index may have a chance to test a higher resistance level.”

The Hong Kong-listed iShares FTSE China A50 Index ETF, which tracks the 50 largest domestically listed Chinese companies, gained 4.4 percent with volume more than double the five-day average at the time of the day, according to data compiled by Bloomberg. The ETF rose the most since Jan. 17.

U.S. Futures

Futures on the Standard & Poor’s 500 Index rose 0.3 percent today. The S&P 500 lost 0.2 percent yesterday as President Barack Obama said the Republican offer on resolving the so- called fiscal cliff doesn’t go far enough and won’t raise the revenue needed to shrink the U.S. deficit by $4 trillion over the next decade.

Ping An jumped 4.9 percent to HK$60.50, the biggest gain in the Hang Seng Index. HSBC, which rose 1.7 percent today, said it will sell its entire stake for $9.4 billion at HK$59 a share to Thailand’s Charoen Pokphand Group Co., removing investor uncertainty. The sale price compares with yesterday’s closing price of HK$57.65.

Other insurers rose. China Life Insurance Co., the country’s biggest insurer, advanced 4.2 percent to HK$23.45, while New China Life Insurance Co. surged 8.3 percent to HK$26.05.

China has abolished a regulation on insurance companies’ investment limits in commercial banks, according a statement posted on the China Insurance Regulatory Commission’s website yesterday.

Bank Shares Gain

ICBC gained 2.5 percent to HK$5.30, while China Minsheng Banking Corp., a commercial bank, rose 5.1 percent to HK$7.99.

Bank of East Asia increased 2.2 percent to HK$30.35. The shares rose even after agreeing to sell new stock to Sumitomo Mitsui Banking, raising HK$3.3 billion ($426 million) to bolster its capital as it seeks to expand in mainland China.

Chinese developers and cement companies rose after Xinhua News Agency yesterday said China will expand domestic demand and actively promote urbanization to encourage more people to move to cities. Separately, China National Radio reported yesterday China will focus on simplifying taxes on property transactions. That may lead to cheaper property transaction taxes, the report said, citing comments by Liu Heng, a scholar with the Central University of Finance and Economics.

“Lately the government had been relaying messages about improving the economy, in particular its plans for urbanization,” said Mao Sheng, an analyst for Huaxi Securities Co. in Chengdu, China “We can see construction, cement, property companies leading stock gains as we see a clearer direction and roadmap for government reforms.”

Developers Rise

China Resources Land, a state-controlled developer, climbed 2.5 percent to HK$20.70 after Macquarie Group Ltd. said it may record higher sales. Evergrande Real Estate Group Ltd. (3333), a builder that gets all its revenue from China, jumped 8.9 percent to HK$4.09 after reporting sales from January to November were 5.8 percent higher than its annual target for this year. Anhui Conch Cement Co., China’s biggest cement maker, gained 5 percent to HK$27.30.

Futures on the Hang Seng Index gained 2.8 percent to 22,340. The HSI Volatility Index (VHSI) rose 3 percent to 16, indicating traders expect a swing of 4.6 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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