Hong Kong Stocks Rebound on Developers, Energy Stocks

Hong Kong stocks rose, with the benchmark index climbing from its biggest loss in two weeks, as developers and energy companies advanced.

Cheung Kong (Holdings) Ltd. rose 2 percent as property companies rebounded from yesterday’s drop. China Resources Power Holdings Co. led gains on the Hang Seng Index on a report the government is planning to encourage private investment in the power-distribution sector. BYD Co. (1211), an electric-car maker, added 3.1 percent after China yesterday said it will exempt new-energy vehicles from sales taxes to curb pollution.

The Hang Seng Index climbed 0.3 percent to 23,238.99 at the close in Hong Kong after dropping 1.6 percent yesterday. Volume on the measure was 22 percent lower than the 30-day intraday average. The Hang Seng China Enterprises Index, also known as the H-share index, today advanced 0.3 percent to 10,368.13. Stocks pared gains after China trade data missed analyst expectations.

“Investors are disappointed as they were expecting better trade numbers,” said Mari Oshidari, a Hong Kong-based strategist at Okasan Securities Group Inc. “Cautiousness towards China’s economy has receded overall, with the government showing signs it will step in to support growth when needed.”

China’s exports rose 7.2 percent in June from a year earlier, missing a 10.4 percent gain estimated by analysts. Imports climbed 5.5 percent, compared with expectations for a 6 percent advance. Reports on credit growth are due as early as this week.

The Hang Seng Index (HSI) slid 0.3 percent this year through yesterday, paring losses amid signs the economy is stabilizing as China rolls out targeted stimulus measures including reserve-ratio cuts. The gauge traded at 10.8 times estimated earnings, compared with 7.2 for the H-share index and 16.6 for the Standard & Poor’s 500 Index yesterday.

Bank of China

Bank of China Ltd. slid 0.9 percent to HK$3.46 today. Regulators are investigating after China Central Television reported the bank allegedly broke rules on overseas money transfers, two government officials familiar with the matter said. The nation’s largest foreign-exchange lender yesterday denied helping clients illegally move funds.

Chinese railway companies climbed after Citigroup Inc. said the nation’s investment in the industry will rise to a record 880 billion yuan ($142 billion) this year and 990 billion yuan in the next. China Railway Construction Corp. gained 3.5 percent to HK$7.45. CSR Corp., China’s biggest trainmaker, advanced 1.5 percent to HK$6.70.

Fed Concern

Futures on the S&P 500 dropped 0.3 percent today. The underlying gauge yesterday rebounded from a two-day selloff as optimism over corporate earnings and jobs growth outweighed central-bank minutes showing concern investors may be growing complacent about the U.S. economic outlook. Alcoa Inc. jumped to the highest in almost two years after kicking off earnings season with better-than-forecast results.

Recent data indicates the world’s largest economy is recovering from the worst contraction in gross domestic product since 2009, fueling speculation the Federal Reserve may raise rates sooner than estimated. The June payrolls report released last week showed unemployment fell to the lowest level since before the financial crisis peaked six years ago.

A measure of property companies climbed the most among Hang Seng Index’s industry groups. Cheung Kong, which dropped the most since May 5 yesterday, rose 2 percent to HK$142. New World Development Co. (17), a builder controlled by billionaire Cheng Yu-tung, advanced 1.1 percent to HK$9.04.

Mass-residential property prices in Hong Kong are likely to rise 3 percent in 2014, compared with a previous estimate of a 5 percent drop, Daiwa Securities Group Inc., said in a report.

Utilities Climb

China Resources Power rose 3.2 percent to HK$22.90. Datang International Power Generation Co. jumped 4.8 percent to HK$3.94. China’s government is planning private investment in the power distribution sector, Shanghai Securities News reported, citing a draft reform plan.

BYD rose 3.1 percent to HK$46.55. China will waive a 10 percent purchase tax on electric cars from Sept. 1 to the end of 2017, according to a statement posted on the central government’s website yesterday, citing a State Council meeting led by Premier Li Keqiang.

AAC Technologies Holdings Inc. (2018), which supplies speakers to Apple Inc., dropped 5.2 percent to HK$50 as Goldman Sachs Group Inc. cut its rating on the company to neutral from buy after the company lowered its forecast for revenue growth. Jefferies Hong Kong Ltd. also downgraded the shares.

Mainland Shift

Some of the world’s biggest stock investors are shifting their China bets to mainland companies from Hong Kong after the city’s shares climbed to the most expensive levels in 12 years. Investors including Sumitomo Mitsui Trust Bank Ltd. say Hong Kong stocks will struggle as reduced Federal Reserve stimulus weighs on developers and banks that make up more than 35 percent of the MSCI Hong Kong Index.

The Hong Kong Monetary Authority, the city’s de facto central bank, injected HK$2.6 billion ($335 million) into the financial system to prevent the territory’s currency from rising beyond its permitted range against the dollar.

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 Tom Redmond, Jim Powell

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