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Hong Kong Stocks Advance on Li’s Comments on Economy

Hong Kong stocks rose, with the city’s equity benchmark extending its biggest weekly gain since November, after Premier Li Keqiang said conditions are in place to keep China’s economy and markets stable.

The Hang Seng Index climbed 0.5 percent to 23,365.44 at 9:31 a.m. in Hong Kong after rising 1.9 percent last week. More than four stocks gained for each that fell on the 50-member gauge today. The Hang Seng China Enterprises Index, also known as the H-share index, added 0.5 percent to 10,882.79. China’s Shanghai Composite Index rose 0.5 percent.

The Hang Seng Index advanced 17 percent from its June low through Dec. 27 amid signs China’s economy is stabilizing and the U.S. recovery is gaining momentum. The measure traded at 11.1 times estimated earnings as of the end of last week, compared with 16.7 for the Standard & Poor’s 500 Index.

China will implement prudent monetary policy and maintain “appropriate liquidity,” Li said during a Dec. 27 visit to Tianjin, according statement posted on the government’s website yesterday.

The H-share index, which climbed 22 percent from its June 25 low this year through Dec. 27, traded at a multiple of 7.9 times profit. The gauge is headed for its first monthly loss since June on soaring funding costs in China. The gauge pared its December decline on Dec. 24 after the People’s Bank of China conducted its first reverse-repurchase agreements in three weeks, helping ease the tightest financing conditions since a record cash crunch in June.

China’s benchmark money-market rate will probably remain near a record high in next quarter as policy makers seek to reduce debt, according to a Bloomberg survey. The seven-day repurchase rate will average 4.5 percent, the median of 11 estimates shows, close to the all-time high of 4.65 percent recorded over the three months that started Oct. 1.

Futures on the S&P 500 were little changed today after the gauge slipped less than 0.1 percent on Dec. 27 from an all-time high the previous day amid optimism for the economic recovery.

Bullish options on the Hang Seng Index (HSI) rose to a three-year high last week, according to one-month data compiled by Bloomberg. Calls betting on a 5 percent increase in the gauge cost 0.4 point more than puts protecting against a 5 percent decline Dec. 24, the highest since July 2010, the data showed.

To contact the reporter on this story: Adam Haigh in Sydney at ahaigh1@bloomberg.net

To contact the editor responsible for this story: Sarah McDonald at smcdonald23@bloomberg.net

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