Hong Kong Stocks Extend Advance as Developers Lead Gains

Hong Kong stocks rose, with the city’s benchmark index extending its highest level in more than three years, as developers advanced.

Hong Kong Exchanges & Clearing Ltd. gained 3.5 percent after Deutsche Bank AG was among investment banks raising the bourse operator’s price target. China Overseas Land & Investment Ltd. (688), the largest mainland developer listed in Hong Kong, rose 2 percent amid optimism for looser home-purchase policies. Sun Hung Kai Properties Ltd. jumped 4.4 percent to lead gains.

The Hang Seng Index (HSI) added 0.9 percent to 24,640.53, extending its highest close since November 2010. Volume was 48 percent higher than the 30-day average. The Hang Seng China Enterprises Index (HSCEI), also known as the H-share index, gained 0.5 percent to 11,122.22 after yesterday capping a 20 percent advance from a March low.

“Buying interest is still there,” said Jackson Wong, vice president at Tanrich Securities Co. in Hong Kong. “Funds are chasing Chinese financials and mainland-related stocks. At this kind of level the market is a bit tired with no major catalysts.”

H-shares entered a bull market after China cut reserve requirements for some banks, accelerated infrastructure spending and loosened property curbs to keep growth from falling below the official 7.5 percent target. The measure traded at 7.7 times estimated earnings at the close, compared with 11.4 for the Hang Seng Index and 16.6 for the Standard & Poor’s 500 Index yesterday.

China’s banking regulator is allowing some local governments including Shanghai’s to set up asset-management companies to buy bad loans from financial institutions, said three people with knowledge of the matter who asked not to be identified.

Credit Risks

Premier Li Keqiang is grappling with reining in credit risks following an unprecedented surge in lending since the global financial crisis. Banks’ nonperforming loans jumped by 54 billion yuan ($8.7 billion) in the three months through March, the biggest quarterly increase since 2005.

Futures on the S&P 500 (SPX) slid 0.2 percent today. The U.S. benchmark index yesterday added less than 0.1 percent amid optimism over corporate earnings and merger activities.

The Federal Reserve is expected to taper its bond-buying program for the sixth time at a two-day policy meeting that ends tomorrow. Investors will get a reading on second-quarter U.S. economic growth the same day, while the government’s labor report on Aug. 1 may show employers added 231,000 jobs this month.

HKEx, Developers

Hong Kong Exchanges (388) gained 3.5 percent to HK$174.90 after Deutsche Bank raised its target price on the bourse to HK$202 from HK$143, and Bank of America Corp. boosted its projection to HK$185 from HK$150. The stock jumped yesterday after Goldman Sachs Group Inc. reiterated its buy rating, citing prospects for increased revenue at the bourse operator as China implements market reforms.

China Overseas Land rose 2 percent to HK$23.15 and China Resources Land Ltd. (1109) climbed 1.1 percent to HK$17.38. Easing home-purchase limits will boost mainland sales in the second half, UBS AG said. Banks in Shanghai, Beijing and Guangzhou may shorten their mortgage approval and disbursement processes to one month from three months, Shanghai Securities News reported without citing anyone.

Hong Kong builders also climbed. New World Development Co. (17) gaining 3.3 percent to HK$9.54 and Sino Land Co. advancing 2.8 percent to HK$13.40 after Morgan Stanley upgraded the shares. Sun Hung Kai Properties Ltd., Hong Kong’s second-largest developer, jumped 4.4 percent to HK$112.30.

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, Tom Redmond

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