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Hong Kong Stocks Climb as China Moves to Inject Liquidity

Hong Kong stocks rose, with the benchmark index heading for its biggest monthly gain since September, after China’s government moved to alleviate a cash crunch as economic growth slows.

China Minsheng Banking Corp., the nation’s first non-state lender, rose 2.3 percent after the nation’s central bank injected funds into markets through reverse-repurchase agreements for the first time since February. Internet company Tencent Holdings Ltd. (700), the best-performing stock on the Hang Seng Index (HSI) this year, reached a new record high. Yanzhou Coal Mining Co. (1171), China’s fourth-largest producer of the fuel, slumped 9.3 percent after saying it would post an unexpected loss.

The Hang Seng Index rose 0.5 percent to 21,953.96, poised for a 5.5 percent monthly gain. Trading volume today was 36 percent lower than the 30-day average. The Hang Seng China Enterprises Index gained 0.3 percent to 9,669.61 after yesterday dropping the most in two weeks.

“The reverse repo is going to inject some liquidity to the market, and that sends a signal that they’re not going to tighten anymore,” said Jackson Wong, vice president of Hong Kong-based brokerage Tanrich Securities Co. “So the next question will be whether they will do another loosening move.”

China’s monetary authority conducted reverse-repurchase operations after the benchmark interbank lending rate rose to a four-week high. The People’s Bank of China added 17 billion yuan ($2.8 billion) to the financial system today at a yield of 4.4 percent using seven-day reverse repos, which exceeded 5 percent yesterday for first time in four weeks and reached a record of 12.45 percent on June 20.

Lenders Climb

Four of the seven biggest contributors to the Hang Seng Index’s advance today were financial stocks. China Minsheng rose 2.3 percent to HK$7.87. Industrial & Commercial Bank of China Ltd., the country’s biggest lender, climbed 0.6 to HK$5.09.

Tencent, China’s biggest Internet company, climbed 4 percent to HK$363.60, rising a fourth day to extend its record high and lead gains on the Hang Seng Index. The stock jumped 4.1 percent last week after U.S. companies in the sector surged.

Casino stocks advanced. Wynn Macau Ltd., a Hong Kong-listed unit of billionaire Steve Wynn’s casino company, increased 3.6 percent to HK$21.60 after signing a construction contract for new luxury hotel and casino resort in Macau’s Cotai Strip. Sands China Ltd. (1928), a unit of billionaire Sheldon Adelson’s Las Vegas company, rose 2 percent to HK$41.50. Galaxy Entertainment Group Ltd., a casino operator controlled by billionaire Lui Che-woo, rose 1.1 percent to HK$40.35.

Relative Value

The Hang Seng Index fell 3.1 percent this year, the second-worst performance among 24 developed markets tracked by Bloomberg, as shares slid on weaker growth in China and concern the Federal Reserve will taper stimulus. The gauge traded at 10.5 times estimated earnings, compared with 15.3 times for the Standard & Poor’s 500 Index.

Net income at Chinese industrial companies increased 6.3 percent in June from a year earlier, the Beijing-based National Bureau of Statistics said July 27, down from 15.5 percent in May. Official data due on Aug. 1 is expected to show a contraction in mainland manufacturing.

Materials and energy companies led declines this year on the Hang Seng Composite on concern demand will weaken amid slower growth in China’s economy.

Yanzhou Coal tumbled 9.3 percent to HK$5.26. The fuel producer reported a loss of about 2.35 billion yuan ($383 million),citing exchange-rate losses and declining coal prices, according to a Hong Kong stock exchange filing yesterday. Yanzhou forecast on April 25 that first-half net income would drop 75 percent from last year’s 4.91 billion yuan.

Shangri-La Drops

Shangri-La Asia Ltd. plunged 6 percent to HK$12.20, the biggest drop since March 2012. The hotelier said first-half net income will see a “material decline” on an expected slide in mainland operating profit.

Futures on the S&P 500 (SPX) rose 0.2 percent today. The U.S. equity benchmark declined 0.4 percent yesterday as fewer Americans signed contracts in June to buy previously owned homes.

Hang Seng Index futures gained 0.4 percent to 21,932. The HSI Volatility Index slid 2.8 percent to 17.77, indicating traders expect a swing of 5.1 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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