Hong Kong Stocks Gain; China Rally Tempers Cyprus Concern
Hong Kong stocks rose for the first time in four days as a rally among mainland Chinese shares in the city offset investor concerns that Cyprus’s rejection of a bailout plan shows Europe will struggle to contain its debt crisis.
Guangzhou R&F Properties Co. (2777) jumped 7.6 percent after the homebuilder in the Southern Chinese city posted full-year earnings that beat analyst estimates. A gauge of property stocks in Hong Kong fell 9.4 percent this month through yesterday. Citic Securities Co. and Haitong Securities Co. gained more than 4 percent on speculation China’s biggest brokerages will deliver improved profits as the stock market recovers.
The Hang Seng Index rose 1 percent to 22,256.44 at the close, with about three shares rising for each that fell. The gauge declined 2.7 percent this year through yesterday, making it the world’s worst-performing developed market outside of Italy. Shares fell as China’s efforts to rein in property prices and restructure its economy added to concern that Europe mightn’t be able to contain its debt crisis.
“Hong Kong stocks will bounce back as some shares are looking attractive,” said Khiem Do, Hong Kong-based head of Asian multi-asset strategy at Baring Asset Management Ltd., which oversees about $51 billion. “How far they bounce back will depend on whether companies can continue to deliver earnings growth. The market has been spooked by what’s happening in Cyprus and concerns about China.”
The Hang Seng China Enterprises Index (HSCEI) climbed 2.2 percent to 10,978.75, the most since Feb. 28, before a report due to be released tomorrow that may show Chinese manufacturing expanded at a faster pace this month. The gauge declined 12 percent from a Feb. 1 high through yesterday, entering a so-called correction, on concern China will introduce more property curbs after home prices posted the broadest advance since December 2011.
Trading volume on the Hang Seng Index was about equal with the 30-day intraday average, data compiled by Bloomberg show. Mainland companies make up more than half of the city’s market value, according to Hong Kong Exchanges & Clearing Ltd., operator of the city’s only public bourse.
The benchmark index will more than double from current levels by 2015 as global central banks maintain loose monetary policies and as China’s economy grows, Morgan Stanley analysts led by Jonathan Garner wrote in a report yesterday.
Shares on the gauge traded at 10.8 times estimated earnings, compared with 14 for the Standard & Poor’s 500 Index and 12.8 for the Stoxx Europe 600 Index, according to data compiled by Bloomberg.
Futures on the Standard & Poor’s 500 Index added 0.3 percent today. The S&P 500 dropped 0.2 percent yesterday, sending the gauge to its longest slump of the year, as Cyprus lawmakers rejected an unprecedented levy on bank deposits, dealing a blow to European plans to force savers to shoulder part of the country’s bailout.
“Rather than being interpreted as an acute contagion issue, this has served more as a reminder that the long-term structural problems present in Europe persist,” Misha Graboi, portfolio manager at Irvine, California-based Pacific Alternative Asset Management Co., said in an e-mail. “While the European Central Bank is aggressively trying to shore up market confidence in the short run, exactly how the Euro zone extracts itself from these issues is not clear.”
Cyprus is the fifth euro-zone country to seek a bailout since 2010 to avoid a collapse of its financial system. The country isn’t a major problem, Laurence D. Fink, chief executive officer of BlackRock Inc., the world’s largest asset manager, said in a Bloomberg Television interview in Hong Kong.
Chinese developers led gains in Hong Kong as companies from Guangzhou R&F Properties and Country Garden Holdings Co. (2007) posted earnings that surpassed expectations.
Guangzhou R&F Properties climbed 7.6 percent to HK$12.20 as it reported full-year net income of 5.5 billion yuan ($885 million), which exceeded the 4.89 billion average estimate by three analysts
Country Garden Holdings Co., a Chinese developer controlled by billionaire Yang Huiyan, surged 9.4 percent to HK$3.95, the most since December 2011. Brokerages including BNP Paribas and Maybank Kim Eng Holdings Ltd. raised their ratings on the stock to buy after the company posted earnings that beat analyst estimates.
China Minsheng Banking Corp., the nation’s first privately owned lender, gained 5.7 percent to HK$10.70. Total assets at the Hong Kong unit, which began operations a year ago, will grow to more than HK$100 billion ($13 billion) in three years, including off-balance-sheet items, Lin Zhihong, chief executive officer at the Chinese lender’s subsidiary in the city, said in an interview March 15. The figure stood at HK$33.2 billion at the end of last year.
Chinese brokerages rallied as the Shanghai Composite Index advanced by most since Jan. 14. The measure will rally after reaching a 2013 low this week, according Tom DeMark, the founder of Market Studies LLC.
Citic Securities, the nation’s biggest brokerage, rose 5.7 percent to HK$17.74. Haitong Securities, the second-largest, added 4.8 percent to HK$11.32.
China Mobile Ltd. (941), the nation’s biggest mobile-phone carrier, increased 1.4 percent to HK$81.45, the highest since Dec. 5. The company gained 5.8 million new wireless users in February, or 52 percent of new subscribers, the most in 18 months, according to a report by Bloomberg Industries.
Hang Seng Index (HSI) futures increased 1.3 percent to 22,255. The HSI Volatility Index (VHSI) fell 2.6 percent to 16.54, indicating traders expect a swing of 4.7 percent for the equity benchmark in the next 30 days.
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