Most Hong Kong Stocks Advance on Low Trading Volume

Most Hong Kong stocks rose amid low trading volume, after the benchmark index capped back-to-back weekly gains, as consumer and industrial companies advanced.

CSPC (1093) Pharmaceutical Group Ltd. jumped 6.8 percent after posting an increase in first-quarter profit last week, leading consumer-goods makers to the biggest gain among the 11 industry groups on the Hang Seng Composite Index. Minth Group Ltd., which makes car parts, rose 5.5 percent after a report that Chinese President Xi Jinping urged the development of new-energy vehicles. China Resources Enterprise Ltd., the company that makes the country’s best-selling beer with SABMiller Plc, lost 4 percent after its quarterly earnings fell.

About five stocks gained for every four that declined on the Hang Seng Index, which closed little changed at 22,963.18. The gauge rose as much as 0.5 percent and fell 0.3 percent throughout the day, on volume that was 39 percent less than the 30-day average. The Hang Seng China Enterprises Index (HSCEI) climbed 0.1 percent to 10,126.48. The gauge of mainland companies traded in the city climbed 1.7 percent last week, extending its rebound from a May 7 low to 4.8 percent.

“We might be looking at a short-term correction with the Hang Seng struggling to get through that 23,000 level,” Desmond Chua, a strategist at CMC Markets in Singapore, said by phone. “It remains one of the cheapest markets and there is still a value story there, but we’ve had a good rebound already this month.”

The Hang Seng Index is up 3.7 percent this month, the third-best performer among major developed markets tracked by Bloomberg. The Standard & Poor’s 500 Index climbed to a record at the end of last week, closing above 1,900 for the first time, as a report showed purchases of new homes climbed in April. U.S. and U.K. equity markets are closed for holidays today.

Index Multiples

The Hang Seng China Enterprises Index traded at 7 times estimated earnings today, the lowest multiple among benchmark indexes in Asia, data compiled by Bloomberg show. That compares with 10.7 times for the Hang Seng Index and 16.1 on the S&P 500 at the end of last week, the data show.

The Hang Seng Index fell 1.5 percent this year, while the H-share gauge slid 6.4 percent amid signs of a slowdown in Asia’s biggest economy.

Premier Li Keqiang said last week that China will fine-tune policy when needed to solve problems such as tight funding conditions for the real economy, especially financing difficulties for small companies, according to a statement posted on the central government website.

CSPC jumped 6.8 percent to HK$6.73. Morgan Stanley reiterated its overweight rating on the stock, saying the company is on track to meet its 30 percent year-on-year profit growth target for this year.

Minth, also a constituent of the Hang Seng Composite Index’s consumer-goods gauge, gained 5.5 percent to HK$13.80. China’s Xi urged the development of new energy vehicles, Xinhua News Agency reported, citing the leader last week in a visit to Shanghai. Automakers should develop products based on market needs to promote the industry as a strong economic driver, the report cited Xi as saying.

Property Curbs

China has allowed most cities to adjust home-buying curbs, the Southern Weekly reported May 22, citing several unidentified people from the housing ministry. Speculation that the government will ease the policy mounted as data showed new building construction has fallen 22 percent this year while sales have slumped, creating a drag on the economy.

“Recent proactive reform measures, supportive policies and stabilizing economic data could help alleviate investors’ concerns, thus protecting the market from further massive downside,” China International Capital Corp. analysts led by Hanfeng Wang wrote in a note about the outlook for Chinese shares in Hong Kong. “We continue to expect policies to be eased in small steps, which could gradually improve investors’ pessimistic expectations on reforms and growth.”

Among shares that fell, China Resources Enterprise (291), a state-backed retail and beer company, dropped 4 percent to HK$22.95 after saying its first-quarter earnings declined 32 percent as a slowing economy damped consumer spending.

To contact the reporters on this story: Kana Nishizawa in Hong Kong at knishizawa5@bloomberg.net; Adam Haigh in Sydney at ahaigh1@bloomberg.net

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

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