Hong Kong H-Shares Rise After China Data; Casinos Drop

A gauge of Chinese stocks traded in Hong Kong headed for the highest since January after data showed mainland inflation quickened to the fastest pace in four months. Casino shares led declines on the Hang Seng Index.

Nine Dragons Paper Holdings Ltd. surged 6.6 percent after Citigroup Inc. said the Chinese central bank’s cuts to reserve requirement ratios will help the paper-making industry. Citic Securities Co. added 3.3 percent to lead gains on the Hang Seng China Enterprises Index. SJM Holdings Ltd. (880) slid 5.6 percent after Macau’s biggest casino operator said a regulator is clamping down on China UnionPay Co.’s debit cards on gaming floors. The Hang Seng Index (HSI) was set to erase this year’s loss.

The Hang Seng China Enterprises Index, also known as the H-share index, climbed 1.1 percent to 10,519.46 as of 2:53 p.m. in Hong Kong. The measure was poised for its highest close since Jan. 2, with about six shares rising for each that fell. The city’s benchmark Hang Seng Index rose 0.9 percent to 23,323.79 today, set to reverse declines of as much as 9.1 percent this year.

“China’s improving data was in line with the existing trend, but investors worry whether selective easing is good enough to keep that on track,” said Ben Kwong, director of brokerage KGI Asia Ltd. “Controls on use of payment and anti-corruption measures will all lead to slower casino revenue growth this year.”

The nation’s consumer price index rose 2.5 percent last month from a year earlier, the National Bureau of Statistics said today. Analysts surveyed by Bloomberg had projected a 2.4 percent rise. The government has set a full-year target of 3.5 percent inflation, which leaves room for monetary easing. Producer prices slipped 1.4 percent. Reports are also due this week on new loans, money supply, retail sales and industrial output.

Stocks Rebound

The Hang Seng Index has rebounded from this year’s low in March as China added stimulus to counter an economic slowdown. The equity gauge traded at 10.7 times estimated earnings yesterday, compared with 7.3 for the H-share index and 16.5 for the Standard & Poor’s 500 Index.

The People’s Bank of China yesterday announced a 0.5 percentage-point cut in reserve requirements for some bank aimed at supporting smaller companies and agricultural borrowers. The reduction will take effect June 16 and applies to two-thirds of city commercial banks, 80 percent of non-county level rural commercial banks and 90 percent of non-county level rural cooperative banks.

The cut in reserve requirements will add 70 billion yuan ($11.2 billion) into the financial system and should help ease credit conditions, Qu Hongbin, an economist at HSBC Holdings Plc, wrote in a note dated yesterday.

U.S. Futures

Futures on the S&P 500 slipped 0.2 percent today. The underlying gauge climbed 0.1 percent yesterday, extending a run of record highs, as small-cap shares rallied and Family Dollar Stores Inc. advanced with Analog Devices Inc. amid deals activity.

The Macau Monetary Authority plans to further restrict the use of China UnionPay cards at casinos, according to the head of SJM Holdings. The regulator has ordered jewelery shops and pawnshops that operate on casino floors to remove UnionPay card terminals by July 1, SJM Chief Executive Officer Ambrose So said in an e-mail responding to a Bloomberg News inquiry.

Deutsche Bank AG lowered its estimate for annual Macau casino revenue growth to 12 percent from 15 percent on VIP risks and downgraded SJM and Wynn Macau Ltd. to hold from buy, Hong Kong-based analyst Karen Tang wrote in a note yesterday.

Hong Kong Financial Secretary John Tsang told lawmakers yesterday he may announce a cut in the city’s full-year growth forecast should retail sales continue to decline after falling 9.5 percent in April from a year earlier. Tsang said the government doesn’t plan on broad cuts to mainland visitors after studying plans to limit arrivals.

Sinopec Rallies

China Petroleum and Chemical Corp., also known as Sinopec, gained 2.2 percent to HK$7.31. The company made a breakthrough in technology for its deep oil and gas reserves in the Shengli oilfield basin, China Science Daily reported on its website today.

Citic Resources Holdings Ltd. (1205), the commodities trader controlled by China’s largest state-owned company, dropped 9.8 percent to HK$1.20 after saying an investigation may impact its inventory at Qingdao Port. The company stores alumina and copper there, and has obtained sequestration orders for its assets as a “precautionary measure,” it said in a statement. The port is counting industrial metals to determine whether they match the amount pledged as collateral for loans, people with knowledge of the probe said.

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

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