Hong Kong Stocks Rise to Two-Year High; Developers Lead Gains

Hong Kong stocks rose, pushing the benchmark index to its highest close in more than two years, after Goldman Sachs Group Inc. said the city will benefit from extra liquidity released by central banks and China’s growth.

Sun Hung Kai Properties Ltd., the city’s No. 1 developer by market value, jumped 6.6 percent after Goldman Sachs named the stock as a possible beneficiary of liquidity. Cosco Pacific Ltd., a container-terminal unit of Asia’s largest shipping company by market value, surged 5.6 percent.

The Hang Seng Index climbed 2 percent to 24,144.67, its highest close since June 2008, with developers posting the biggest gains. Stocks rose ahead of the conclusion of a U.S. Federal Reserve policy meeting which economists reckon will lead to further purchases of securities to stimulate growth.

“There are expectations of quantitative easing in the U.S., which I don’t believe the U.S. government can afford not to extend to the maximum amount given the economy’s lack of momentum,” said Castor Pang, Hong Kong-based research director at Cinda International Holdings Ltd.

The Hang Seng China Enterprises Index of so-called H shares of Chinese companies jumped 2.2 percent to 13,820.99.

The main Hang Seng Index has gained 10 percent this year on expectation that growth in corporate earnings will weather concerns about the pace of the U.S. economic recovery and China’s steps to curb rising property prices. Shares in the gauge trade at an average 15.3 times estimated earnings, compared with about 17.2 times at the start of the year.

Liquidity-Driven Gains

Goldman Sachs raised its 12-month target for the Hang Seng Index to 29,000. Hong Kong will benefit most from a structural capital relocation away from developed markets to emerging ones, according to a Goldman Sachs report today.

Cosco Pacific surged 5.6 percent to HK$13.26. China Merchants Holdings (International) Co., which has stakes in ports that move about a third of the nation’s container traffic, climbed 5.1 percent to HK$29.10.

Sun Hung Kai rallied 6.6 percent to HK$144.50, the biggest gain on the Hang Seng Index. Cheung Kong (Holdings) Ltd., the city’s No. 2 developer by market value, rose 2.6 percent to HK$126.10. Property stocks such as Sun Hung Kai and Cheung Kong would benefit from liquidity-driven real estate inflation, the Goldman Sachs report said.

Land Auction

The Hang Seng Property Index’s 3.4 percent increase was the biggest among the four industry groups tracked by the Hang Seng Index. New World Development Co., a Hong Kong-based developer, advanced 2.9 percent to HK$16.22.

Stocks advanced even after the Hong Kong government sold a building site in Kowloon Tong to Chinachem Group for HK$2.17 billion ($280 million) at an auction today. That was below the HK$2.7 billion median estimate in a Bloomberg News survey.

Semiconductor Manufacturing International Corp. rose 4.6 percent to 69 Hong Kong cents after China’s biggest chipmaker reported a second straight quarter of profit. Net income was $30.4 million in the third quarter, compared with a loss of $69.3 million a year earlier, the company said.

Industrial & Commercial Bank of China Ltd., the world’s largest lender by market value, climbed 4.5 percent to HK$6.69 after telling analysts that three-quarters of loans to local-government finance vehicles are backed by sufficient cash flows to cover payments.

Theme Town

Bank of China Ltd., the nation’s third biggest by market value, advanced 2.3 percent to HK$4.96. The lender won’t need additional fund-raising over the next three years based on current conditions, President Li Lihui said.

SMI Corp. climbed 3.2 percent to 49 Hong Kong cents. The company, which produces television dramas and invests in property, said it has signed a letter of intent to buy a 90 percent stake in a Beijing “theme town” project for no more than 930 million yuan ($139 million). The target project will contain film-production, hotel, shopping and entertainment facilities, SMI said.

Futures on the Hang Seng Index increased 1.6 percent to 24,065. All but four stocks rose among the measure’s 45 constituents.

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