Hong Kong Stocks Rise for Second Day Before China Data

Hong Kong stocks rose, with the benchmark index rising a second day, before the release of China’s second-quarter economic growth figures.

Telecommunications companies extended yesterday’s advance, with China Mobile Ltd. (941) adding 3.4 percent. ZTE Corp., a maker of video-conferencing systems, jumped 8.4 percent after raising its first-half profit forecast. Kingdee International Software Group Co. climbed 6.5 percent to a three-month high after saying it started offering applications for small businesses with Tencent Holdings Ltd.

The Hang Seng Index (HSI) added 0.5 percent to 23,459.96 at the close in Hong Kong, with trading volume 24 percent lower than its 30-day average. The Hang Seng China Enterprises Index, also known as the H-share index, gained 0.3 percent to 10,489.15. Shares maintained gains after data today showed China credit expansion beat estimates.

“We think the Chinese economy is in the process of a moderate recovery,” said Cliff Tan, Hong Kong-based East Asia head of research for Bank of Tokyo-Mitsubishi UFJ. “I continue to have concerns because toward the end of the year global equity markets are still a bit vulnerable because the first Federal Reserve rate hike will be coming up.”

The Hang Seng Index advanced 0.7 percent this year, reversing losses as data signaled stabilization in China’s economy as the government rolled out targeted stimulus. The gauge traded at 10.9 times estimated earnings at the close, compared with 7.3 for the H-share index and 16.7 for the Standard & Poor’s 500 Index yesterday.

China Economy

New yuan loans rose to 1.08 trillion yuan ($174 billion) in June compared with analysts’ estimates of 955 billion yuan and 870.8 billion the month before, official data today showed. M2 money supply, aggregate financing and foreign direct investment all exceeded analyst estimates in June.

China reports second-quarter gross-domestic product tomorrow, with analysts expecting a 7.4 percent expansion from a year earlier. June retail sales and industrial production are due the same day.

China’s Premier Li Keqiang said he is confident growth can be maintained at a medium to high level, according to a statement posted on the central government’s website. Downward pressure and difficulties for China’s economy will continue for a while, Li said, urging improvement of various policies to support the economy and reduce financing and trading costs. The nation’s official growth target is 7.5 percent.

Futures on the S&P 500 were little changed. The underlying gauge rose 0.5 percent yesterday as Citigroup Inc. rallied after beating earnings forecasts and Internet shares rebounded. Data signaling strength in the world’s largest economy prompted Goldman Sachs Group Inc. to push forward its forecast for when Fed will raise interest rates to the third quarter of next year rather than the first three months of 2016.

Telecoms Advance

A measure of telecommunications companies on the Hang Seng Composite Index jumped 2.8 percent to its highest since Dec. 10. China Mobile rose 3.4 percent to HK$81.20, while China Unicom (Hong Kong) Ltd. gained 1.1 percent to HK$13. China Telecom Corp. advanced 1.7 percent to HK$4.12. The nation’s three biggest mobile carriers jumped yesterday on speculation their cellular tower joint venture will reduce costs.

ZTE jumped 8.4 percent to HK$16.30. The communications company raised its first-half profit forecast to a range of 1 billion yuan to 1.15 billion yuan, from 800 million yuan to 1 billion yuan announced in April.

Kingdee jumped 6.5 percent to HK$2.80 and Tencent advanced 0.8 percent to HK$123.80 after jointly launching applications to serve small businesses.

Zoomlion Heavy Industry Science & Technology Co. (1157) fell 3 percent to HK$4.46. The construction-machinery maker said it expects first-half profit will plunge by as much as 70 percent from a year earlier. The stock’s price target was cut to HK$4.70 from HK$5.20 at Goldman Sachs.

Local Stimulus

China’s regional authorities are also spending to prop up growth as the central government limits broader stimulus. Northern Hebei province, where 4.2 percent first-quarter expansion pace was less than half that of a year earlier, will invest 1.2 trillion yuan ($193 billion) in areas including railways, energy and housing, according to an article in Hebei Daily last month. Borrowing to fund investment risks exacerbating financial dangers from local-government debt that swelled to about $3 trillion as of June 2013.

The Hong Kong Monetary Authority, the city’s de facto central bank, injected HK$1.937 billion ($250 million) into the city’s banking 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 Jim Powell

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