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Hong Kong Stocks Play Catch-Up With Gains in Shanghai Shares

Hong Kong stocks caught up with gains in Chinese shares after a two-holiday as a report showed profit at mainland industrial companies rose.

Guangzhou R&F Properties Ltd. (2777), a builder in the southern Chinese city, rose 0.9 percent. Anhui Conch Cement Co., China’s biggest cement maker, gained 1.4 percent amid speculation the government’s urbanization plan will support demand. Shipmaker China Rongsheng Heavy Industries Group Holdings Ltd. (1101) tumbled 6.7 percent after saying it may report a full-year loss.

The Hang Seng Index gained 0.4 percent to 22,638.89 as of 10:37 a.m. in Hong Kong. About three stocks advanced for each that fell on the 50-company measure, with volume 34 percent below the 30-day average for the time of day. The Hang Seng China Enterprises Index of mainland companies increased 0.8 percent to 11,364.31. The Shanghai Composite Index gained 2.8 percent in the two days through yesterday.

“The A-share market was doing good while Hong Kong was in holiday for two days and that’s stimulating the market,” said Linus Yip, chief strategist at First Shanghai Securities in Hong Kong. “Hong Kong remains firm. But it already surged a lot in the past two to three months because of hot money coming in. There may be some profit taking but the selling pressure isn’t too strong.”

Hong Kong’s benchmark index advanced 22 percent this year through Dec. 24 as central banks from Europe, the U.S. and Japan announced stimulus. The city’s de facto central bank intervened in October for the first time since 2009 to defend the local currency’s peg to the U.S. dollar as investors poured stimulus- driven funds, “hot money,” into the city.

Relative Value

Shares on the measure traded at 11.8 times average estimated earnings yesterday, compared with 13.7 for the Standard & Poor’s 500 Index and 12.7 for the Stoxx Europe 600 Index, according to data compiled by Bloomberg.

Chinese industrial companies’ profits rose in November. Net income gained 22.8 percent from a year earlier to 638.5 billion yuan ($102 billion), the National Bureau of Statistics said today in Beijing, after a 20.5 percent rise in October.

Futures on the Hang Seng Index (HSI) climbed 0.5 percent to 22,663. The HSI Volatility Index (VHSI) jumped 4.2 percent to 16.57, indicating traders expect a swing of 4.8 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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