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Hong Kong Stocks Rise After Holiday on China PMI Report

Hong Kong stocks rose, with the benchmark index capping its highest close since January after trading resumed from a holiday, as investors weighed reports on China’s manufacturing industry. Casino operators declined.

China Resources Power Holdings Co., a state-owned power generator, increased 4.9 percent to lead gains on the Hang Seng Index. Industrial & Commercial Bank of China Ltd., the nation’s largest lender, climbed 2 percent after policy makers said they would lower the reserve requirement for some banks. Galaxy Entertainment Group Ltd., controlled by billionaire Lui Che-woo, dropped 3.1 percent after Macau casino-revenue growth missed estimates in May.

The Hang Seng Index climbed 0.9 percent to 23,291.04, its highest close since Jan. 2 and 0.1 percent away from erasing this year’s loss. Trading volume was 35 percent above the 30-day intraday average. The gauge jumped as much as 1.1 percent in early trading on optimism about China’s official manufacturing Purchasing Managers’ Index rising to a five-month high, before paring gains as a private measure of the industry missed estimates. The Hang Seng China Enterprises Index (HSCEI) of mainland companies, also known as the H-share index, added 1.2 percent to 10,368.12.

“China’s growth is still moderating but the pace of deceleration is slowing,” said Teresa Chow, a fund manager who helps oversee about $1.7 billion at RBC Investment Management (Asia) Ltd. “Certainly if you see better macro data and there’s easing from China officials, sentiment will improve but that may be short lived unless fundamentals change.”

PMI Readings

The nation’s official Purchasing Managers’ Index rose to 50.8 in May, a report showed June 1, the highest since December and topping analyst estimates. A final PMI reading from HSBC Holdings Plc and Markit Economics published today came in at 49.4, trailing projections. Fifty is the dividing line between expansion and contraction in the industry. A separate government report today on the services industry showed faster growth.

The H-share gauge has pared this year’s loss to 4.1 percent as China enacts measures dubbed mini-stimulus to revive the economy. The index trades at 7.2 times estimated earnings, compared with 10.8 for the Hang Seng Index (HSI) today and 16.3 for the Standard & Poor’s 500 Index yesterday.

Lenders rose after China’s cabinet said on May 30 policy makers will “appropriately” lower the reserve requirement for banks that have extended a certain amount of loans to rural borrowers and smaller companies. ICBC increased 2 percent to HK$5.14, while China Construction Bank Corp. (939), the nation’s second-largest lender by market value, gained 1.8 percent to HK$5.79.

U.S. Futures

Futures on the S&P 500 slid 0.1 percent today. The underlying gauge climbed 0.1 percent yesterday, erasing an early loss, as the Institute for Supply Management twice corrected the reading for its May manufacturing index.

China Resources Power rose 4.9 percent to HK$21.35, leading the Hang Seng Index higher, followed by Cosco Pacific Ltd., the container-terminal arm of the largest mainland shipping group, which climbed 4.5 percent.

Hong Kong reported data on April retail sales after the market close today. Sales dropped 9.8 percent by value from a year earlier, more than double the rate estimated by analysts and accelerating from a revised 1.5 percent decline in March.

China Everbright

China Everbright International Ltd. (257) added 7 percent to HK$10.56 after saying it agreed to transfer water-treatment assets to HanKore Environment Tech Group Ltd.

Gaming companies dropped after Macau’s Gaming Inspection and Coordination Bureau said the city’s casino revenue rose 9.3 percent in May from a year earlier, trailing the median 14.5 percent growth estimated by analysts.

Galaxy Entertainment fell 3.1 percent to HK$60.05, while Sands China Ltd. (1928), a unit of Las Vegas Sands Corp., retreated 1.4 percent to HK$55.70.

To contact Bloomberg News staff for 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 Tom Redmond

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