Hong Kong’s Hang Seng Closes Above 25,000 on Earnings

Hong Kong stocks advanced, with the city’s benchmark index closing above 25,000 points for the first time since May 2008, as investors weighed earnings reports amid signs geopolitical tensions are easing.

China Resources Land Ltd. led gains on the Hang Seng Index after the developer agreed to buy assets from its parent. Galaxy Entertainment Group Ltd. added 3.4 percent after the casino operator beat earnings estimates. Cnooc Ltd. rose 1.1 percent after Credit Suisse Group AG upgraded the oil explorer’s shares. Solomon Systech (2878) International Ltd. sank 9.3 percent as the electronics maker reported a first-half loss.

The Hang Seng Index climbed 0.7 percent to 25,122.95 after falling 0.2 percent earlier. The gauge closed at its highest level since May 21, 2008. The Hang Seng China Enterprises Index (HSCEI), also known as the H-share index, added 0.3 percent to 11,094.59, reversing a 0.4 percent decline.

“Strong liquidity, better earnings and investors getting more bullish on the Chinese economy” will provide further support for the rally, Steven Leung, director of institutional sales at UOB-Kay Hian Holdings Ltd., said by phone. “Investors are also getting excited about asset injections from Chinese SOEs.”

China Resources Land surged 7.6 percent to HK$18.18 after saying it agreed to buy a Shenzhen property project from a unit of its state-owned parent. Financial details weren’t disclosed. The deal could be worth HK$20 billion ($2.6 billion), broadcaster DBC reported yesterday, citing a person it didn’t identify.

Relative Value

The H-share gauge rose 21 percent from this year’s low in March through amid speculation China will add stimulus to meet its growth goal. The index traded at 7.7 times estimated earnings today, compared with 11.6 for the Hang Seng Index (HSI) and 16.5 on the Standard & Poor’s 500 Index (SPX) yesterday.

Galaxy climbed 3.4 percent to HK$61.90. The gaming company’s adjusted earnings before interest, taxes, depreciation and amortization for the three months ended June rose 15 percent to HK$3.5 billion from a year ago. That compared with the HK$3.4 billion average of 16 analyst estimates compiled by Bloomberg.

China Medical System Holdings Ltd. jumped 8.8 percent to a record HK$10.94. The drugmaker reported first-half net income increased to 412.7 million yuan ($67 million) from 314.7m yuan a year earlier.

Cnooc rose 1.1 percent to HK$15.40. Credit Suisse raised its rating on the stock to neutral from underperform after the energy company’s parent announced plans to cut costs and improve earnings that exceeded analysts estimates.

Among shares that declined, Solomon Systech slumped 9.3 percent to 39 Hong Kong cents. The company reported a loss of $1.47 million for the first six months of the year.

U.S. Futures

Futures on the S&P 500 climbed 0.2 percent today. The U.S. equity benchmark index increased 0.9 percent yesterday, while the Nasdaq Composite Index jumped 1 percent to the highest level since 2000. A gauge of confidence in the U.S. housing industry climbed to the highest level in seven months.

Data yesterday showed U.S. homebuilder sentiment rose in August, and Federal Reserve Chair Janet Yellen was among global central bankers preparing to meet in Jackson Hole, Wyoming.

“Today is driven by geopolitical risks seen as easing and good U.S. economic data ahead of Yellen’s speech at Jackson Hole,” said Stuart Beavis, head of institutional equity derivatives at Vantage Capital in Hong Kong. “I am a hint wary that markets are too calm and that they are too dismissive of the end of or calming of geopolitical risk. It’s definitely not over yet and should still be followed closely.”

Israel and Palestinian militants agreed to extend their five-day truce by 24 hours. In Iraq, Kurdish and government forces retook the nation’s largest dam from rebels. The Red Cross is close to working out details of a safe-passage plan for a Russian aid convoy intended for southeastern Ukraine. Ukrainian Foreign Minister Pavlo Klimkin met Russian counterpart Sergei Lavrov for more than five hours of talks in Berlin as they sought to ease tensions.

To contact the reporters on this story: Jonathan Burgos in Singapore at jburgos4@bloomberg.net; Anna Kitanaka in Tokyo at akitanaka@bloomberg.net

To contact the editors responsible for this story: Sarah McDonald at smcdonald23@bloomberg.net Jim Powell

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