Hong Kong stocks climbed, with the benchmark equity index rebounding from two days of declines, after U.S. labor data beat estimates and China’s government said fiscal funds should be used to stabilize economic growth.
Li & Fung Ltd. (494), a supplier of toys and clothes to Wal-Mart Stores Inc., added 1.1 percent. China Petroleum & Chemical Corp., the nation’s largest refiner, rose 3.3 percent after oil prices surged amid unrest in Egypt. Biostime International (1112) Holdings Ltd., a supplier of infant formula, tumbled 14 percent after competitors said they plan to cut prices.
The Hang Seng Index increased 1.7 percent to 20,493.42 as of 11:22 a.m. in Hong Kong, with just five of the gauge’s 50 companies falling. Trading volume on the measure was 26 percent lower than its 30-day intraday average, according to data compiled by Bloomberg. The Hang Seng China Enterprises Index (HSCEI) of mainland shares climbed 2 percent to 9,073.47.
“Investors are regaining confidence that the U.S. economy may not be so bad,” said Jackson Wong, vice president of Hong Kong-based brokerage Tanrich Securities Co. “Before, everyone was betting on China to boost growth. Now the focus is shifting back to the U.S.”
The Hang Seng Index (HSI) posted its biggest monthly decline in in a year in June, declining 7.1 percent as China’s money-market rates surged to a record and Federal Reserve Chairman Ben S. Bernanke said stimulus may be dialed down if the U.S. economy shows sustained improvement.
Shares on the benchmark gauge traded at 9.57 times estimated earnings yesterday, compared with multiples of 14.65 for the Standard & Poor’s 500 Index and 12.65 for the Stoxx Europe 600 Index, according to data compiled by Bloomberg.
The Hang Seng China Enterprises Index, also known as the H-share index, capped its worst first half of a year since 2008 last week. The gauge closed 27 percent below its Feb. 1 high yesterday. The measure trades at 1.07 times the value of net assets, a level not seen since the 2008 global financial crisis.
Just two of 11 industries on the Hang Seng Composite Index have advanced this year. Materials and energy companies have led declines on signs China’s economic growth is slowing. Reports this week showed the country’s industrial expansion in manufacturing and services is losing pace as the government seeks to redirect the economy away from exports.
Chinese Premier Li Keqiang said fiscal funds should be used to redevelop shantytowns and improve basic infrastructure to stabilize the world’s second-largest economy. Money should be allocated to transform the structure of the economy to focus more on domestic consumption, the State Council said in a statement on its website yesterday.
China’s economic growth in the second half may be 7.6%, according to a State Information Center report published in China Securities Journal. Goldman Sachs Group Inc., China International Capital Corp., Barclays Plc and HSBC Holdings Plc last month pared their China growth projections for this year to 7.4 percent, below the government’s 7.5 percent goal.
Energy companies led gains on the Hang Seng Composite Index. West Texas Intermediate crude traded near the highest price in 14 months as U.S. stockpiles shrank the most this year and the ouster of Egypt’s president fanned concern unrest will disrupt Middle East oil supply.
China Petroleum (386) jumped 3.3 percent to HK$5.29. Cnooc Ltd., China’s biggest offshore oil company, advanced 3.8 percent to HK$13.02.
Futures on the S&P 500 gained 0.1 percent as the country celebrates the July 4 holiday. The U.S. benchmark yesterday rose to the highest level in two weeks on better-than-estimated labor data as investors watched political developments in Egypt and Portugal.
Jobless claims decreased to 343,000 in the week ended June 29 from a revised 348,000 in the prior period that was higher than initially reported, the Labor Department said today in Washington. An official report tomorrow will probably show the U.S. added 165,000 jobs in June.
Li & Fung gained 1.1 percent to HK$11.16. HSBC Holdings Plc (5), which gets a fifth of its revenue from North America, advanced 1.8 percent to HK$81.25.
Li Ning Co., a sportswear company named after its Olympic gymnast founder, increased 2.4 percent to HK$3.87 on speculation its deal with NBA basketball star Dwyane Wade will boost its brand.
Among stocks that fell, Biostime International tumbled 14 percent to HK$32.25, headed for its steepest two-day drop on record. Nestle SA and Danone SA said their infant-nutrition units will charge less in China after the government started investigating possible pricing and anti-monopoly violations.
Biostime tumbled 20 percent since June 27 through yesterday after saying one of its units was under investigation for suspect pricing of infant formula.
AAC Technologies Holdings Inc. (2018), an acoustic-components maker, slumped 5.1 percent to HK$40.25 after Jefferies Hong Kong Ltd. cut its rating to underperform from hold.
Hang Seng Index futures rose 1.6 percent to 20,496. The HSI Volatility Index slipped 7.3 percent to 22.77, indicating traders expect a swing of 6.5 percent for the equity benchmark in the next 30 days.
“The market will continue to be volatile,” said Lewis Wan, Hong Kong-based chief investment officer at Pride Investments Group Ltd. “I don’t expect there will be a solid rebound from the current levels, even though valuations have been very cheap.”
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