Hong Kong H-Shares Climb for Fourth Day; Tencent Advances

A gauge of Chinese stocks traded in Hong Kong rose for a fourth day as banks and automakers climbed. Tencent (700) Holdings Ltd., Asia’s biggest Internet company, rebounded after buying back shares.

Industrial & Commercial Bank of China Ltd., the nation’s largest lender, gained 2.5 percent as banks provided the biggest boost to the Hang Seng China Enterprises Index. Great Wall Motor Co. rose 6.8 percent to lead gains. Tencent advanced 1.6 percent after dropping 11 percent the past four trading days. Yanzhou Coal Mining Co. rose 4 percent after JPMorgan Chase & Co. reiterated its overweight rating on the stock.

The Hang Seng China Enterprises Index, also known as the H-share index, added 1.6 percent to 10,321.82 at the close in Hong Kong. The gauge dropped 6.9 percent in the first quarter as Chinese data from manufacturing to retail sales fueled speculation the nation would miss its 7.5 percent growth target. The Hang Seng Index (HSI) gained 1 percent to 22,596.97 today, with volume 32 percent higher than the 30-day average.

“The macro numbers we’re getting,” especially in China, may continue to be weak for a few months, said David Gaud, a money manager who helps oversee about $120 billion at Edmond de Rothschild Asset Management. “But in the second half we should see on a relative basis an improvement because of the developed-world recovery.”

China Upgraded

HSBC Holdings Plc raised China’s equities to overweight from underweight. Markets are “overly concerned” about fragility of China financial system, the company’s head of Asia equity strategy Herald van der Linde wrote in a note. The nation’s liquidity system is healthy and there’s ample room for fiscal stimulus, the note said.

China is expected to release measures on investment and consumption soon to stabilize growth and expand domestic demand, China Securities Journal reported, without citing anyone. The steps will accelerate infrastructure and affordable-housing construction in central and western areas of the nation, the report said.

The H-share index has rebounded 12 percent since entering a bear market on March 20. The rally drove the gauge’s 14-day relative strength index, an indicator of trading momentum, to 70.6 today, above a threshold that signals to some analysts that shares have risen too far.

Relative Value

The Hang Seng Index was the second-worst performer among developed markets this year through yesterday as Tencent slumped amid growing concern that valuations overshot earnings prospects and signs of economic slowdown hurt sentiment. The equity gauge traded at 10.4 times estimated earnings today, compared with 15.7 times for the Standard & Poor’s 500 Index yesterday. Tencent’s multiple was 35 as of yesterday’s close, down from an all-time high of 44.6 on March 6.

Futures on the S&P 500 added 0.2 percent after the equity benchmark declined 1.1 percent yesterday, erasing gains for the year as technology shares extended last week’s selloff.

Tencent Rebounds

Tencent rose 1.6 percent to HK$509.50 to halt its four-day drop after buying back HK$76.7 million ($9.9 million) of shares yesterday, according to an exchange filing. The stock had fallen 21 percent through yesterday from a record closing high of HK$635 on March 6.

ICBC rose 2.5 percent to HK$4.90, while China Construction Bank Corp. (939), the nation’s second-largest lender by market value, gained 2 percent to HK$5.56. Sentiment on Chinese banks, which has been hurt by speculation of more mainland defaults, will improve after repayment of corporate bonds and trust products peaks this May or June, Deutsche Bank AG said in a report dated yesterday.

Citic Securities Co., China’s biggest listed brokerage, gained 4.2 percent to HK$17.40. The company received an online brokerage license, Shanghai Securities News reported, citing an unidentified person.

Auto Shares

Great Wall, a mainland producer of sport-utility vehicles and pickups, rose 6.8 percent to HK$41.70. Dongfeng Motor Group Co., which makes vehicles with Nissan Motor Co., increased 3.8 percent to HK$11.50. Brilliance China Automotive Holdings Ltd. (1114) added 3.2 percent to HK$12.80.

Passenger-vehicle sales in China gained 9 percent last month, as deliveries rose from General Motors Co. to Toyota Motor Corp. and consumers pushed forward purchases on concern more cities will limit ownership. Retail deliveries climbed to 1.59 million units in March, the Passenger Car Association said today in a statement.

Yanzhou Coal climbed 4 percent to HK$6.17. There’s attractive risk-reward potential with near-term catalysts likely from analyst upgrades and a seasonal recovery of coal prices, JPMorgan wrote in a report dated today.

“When you look at Hong Kong, especially the H-shares, there is a lot of value,” John Vail, Tokyo-based chief global strategist at Nikko Asset Management Co., which oversees about $157 billion, said in a conference call. “The markets have discounted a lot of trouble in China. That’s when you get value stocks, when people are fearful.”

To contact the reporter on this story: Kana Nishizawa in Hong Kong at knishizawa5@bloomberg.net

To contact the editors responsible for this story: Sarah McDonald at smcdonald23@bloomberg.net Jim Powell, Tom Redmond

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