Hong Kong Stocks Cap Biggest Monthly Advance Since 2012

Hong Kong stocks rose, with the city’s benchmark index capping its biggest monthly advance since September 2012, as property shares extended gains today.

China Resources Land Ltd. (1109), the second-biggest mainland developer listed in the city by market value, rose 3.6 percent after Barclays Plc raised its rating on the stock. Yue Yuen Industrial Holdings Ltd. (551), a shoemaker that gets about 30 percent of its revenue from the U.S., gained 1 percent after a rebound in U.S. economic growth beat estimates. PetroChina Co. (857) slid 2.5 percent to lead declines.

The Hang Seng Index rose 0.1 percent to 24,756.85 at the close in Hong Kong, extending its highest level since November 2010 and bringing its monthly advance to 6.8 percent. Volume today was 38 percent higher than the 30-day average. The Hang Seng China Enterprises Index (HSCEI), also known as the H-share index, added 0.1 percent to 11,130.20. Reports on China manufacturing are due tomorrow.

“There’s an inflow of hot money driving up the market,” said Francis Lun, Hong Kong-based chief executive officer at Geo Securities Ltd. “Everybody expected some correction but it never happened. China’s economy should continue its improvement. All positive factors are in.”

The H-share gauge entered a bull market this week after rising more than 20 percent from its March low. Citigroup Inc. yesterday raised its forecast for China’s economic expansion this year to 7.5 percent from 7.3 percent as policy makers use targeted stimulus to bolster growth. The Hang Seng Index traded at 11.5 times estimated earnings today, compared with 7.7 for the H-share measure and 16.5 for the S&P 500 yesterday.

Factory Activity

Asia’s biggest economy is scheduled to release official July manufacturing data tomorrow, with analysts expecting a reading of 51.4 from 51 the previous month. A private gauge of factory activity from HSBC Holdings Plc and Markit Economics is projected to rise to 52 from 50.7 in June. Levels of 50 or higher signal expansion.

China Resources Land rose 3.6 percent to HK$18.20 after Barclays raised its rating on the stock to overweight from equal-weight. China Overseas Land & Investment Ltd., the largest mainland developer listed in Hong Kong, gained 4.6 percent to HK$23.80 to lead gains on the Hang Seng Index. (HSI)

Futures on the Standard & Poor’s 500 Index slipped 0.5 percent percent today. The U.S. index was little changed yesterday as the economic growth report was offset by weaker earnings and the Federal Reserve’s decision to keep trimming asset purchases. Gross domestic product expanding at a 4 percent annualized pace, topping estimates for a 3 percent rate of growth, after contracting a revised 2.1 percent in the first quarter.

Fed Stimulus

Policy makers tapered monthly bond-buying to $25 billion in their sixth consecutive $10 billion cut, staying on pace to end the asset-purchase program in October. Fed officials led by Chair Janet Yellen are stepping up a debate over when to raise interest rates for the first time since 2006 as unemployment falls faster than expected and inflation picks up toward their 2 percent goal.

Yue Yuen rose 1 percent to HK$26.05. Techtronic Industries Co. (669), a power-tool maker that get most of its sales from North America, gained 0.9 percent to HK$23.40.

The People’s Bank of China offered 26 billion yuan ($4.2 billion) of 14-day repurchase agreements today for the first time in three months, according to a trader at a primary dealer required to bid at the auctions. The nation’s money-market rates declined as the central bank lowered the interest rate it pays on the agreements.

Energy Shares

Among stocks that fell, PetroChina retreated 2.5 percent to HK$10.18. The energy producer was cut to neutral from buy at Societe Generale SA. Kunlun Energy Co. lost 1.6 percent to HK$13.24.

The Hong Kong Monetary Authority, the city’s de facto central bank, bought $640 million during New York hours to defend the city’s peg to the U.S. dollar as demand for the Asian currency continued to be strong.

Hong Kong reported after the close that June retail sales by value contracted 6.9 percent from a year earlier, compared with estimates for a 5.1 percent slump from economists surveyed by Bloomberg.

“The market may need some consolidation after shooting up a lot in the past few days,” said Linus Yip, a strategist at First Shanghai Securities in Hong Kong. “The market is still in an uptrend. China’s figures tomorrow are likely to be good and reconfirm the economy is strong, but the market has already front run so we need to see if it can have another breakthrough in the short term.”

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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