Hong Kong Stocks Advance on Optimism for U.S. Debt Agreement

Hong Kong stocks rose, pushing the Hang Seng Index toward its highest level in more than a week, as exporters gained amid optimism U.S. lawmakers will reach a deal to avoid a default on the government’s debt.

Li & Fung Ltd., a supplier to Wal-Mart Stores Inc. that gets more than half of its sales in the U.S., rose 1.8 percent. BYD Co., a maker of batteries and cars part-owned by Warren Buffett’s Berkshire Hathaway Inc., gained 3.7 percent after saying it will increase investment in lithium businesses. Cnooc Ltd., an offshore oil producer, lost 3.2 percent after Nomura Holdings Inc. cut its rating on the stock to “neutral” from “buy,” citing interruption to its production volumes.

“The U.S. deficit issue appears to have moved forward, with people realizing that there need to be some compromise or there will be consequences,” said Francis Lun, managing director at Lyncean Holdings Ltd., an investment holding company in Hong Kong. “That’s boosting market sentiment.”

The Hang Seng Index gained 0.5 percent to 22,003.69, its highest close since July 11. The Hang Seng China Enterprises Index of Chinese companies’ H shares rose 0.7 percent to 12,382.67.

Li & Fung advanced 1.8 percent to HK$13.72, while Yue Yuen Industrial Holdings Ltd., which makes shoes for Nike Inc., climbed 2.2 percent to HK$25.35. Esprit Ltd., a clothier that gets most of its revenue outside Asia, rose 3.5 percent to HK$22.10.

Debt Deal

The Standard & Poor’s 500 Index rose 1.6 yesterday in New York after President Barack Obama embraced a $3.7 trillion debt-cutting plan by a bipartisan group of senators that would combine tax increases and spending cuts. The plan could end a congressional deadlock over raising the U.S. borrowing limit, Obama said, spurring confidence lawmakers will reach an agreement to help the nation avoid default.

Stocks also advanced after a report from the Commerce Department showed housing starts in the U.S. rose more than forecast in June to the highest level in five months. Work began on 629,000 houses, a 15 percent increase from May, the Commerce Department reported yesterday. The level of starts exceeded the most optimistic forecast in a Bloomberg News survey of economists. Building permits, a sign of future construction, unexpectedly climbed 2.5 percent.

The Hang Seng Index dropped 4.5 percent this year amid concern tighter monetary policy in China will slow the mainland’s economy. The gauge also fell as Europe’s debt crisis spread and after reports showed the U.S. recovery may be stalling. Shares on the index traded at 11.8 times forecast earnings, compared with about 14.4 times at the end of 2010, according to data compiled by Bloomberg.

BYD, Lithium

BYD, which senior Vice President Stella Li said is seeking to introduce more electric vehicles over the next two years, jumped 3.7 percent to HK$24.10 after saying the company will raise investments in a Shenzhen-based lithium battery-maker and a Tibet-based lithium miner following an A-share issue.

361 Degrees International Ltd., a maker of sportswear, surged 6.5 percent to HK$4.42 after saying in an e-mailed statement that second-quarter same-store sales rose 18 percent from a year earlier.

Among stocks that fell, Cnooc dropped 3.2 percent to HK$17.48, the biggest drag on the Hang Seng Index. Nomura Holdings cut its rating on the stock, and lowered its fiscal full-year earnings estimates to 64.5 billion yuan ($9.99 billion) from 70.5 billion yuan.

Separately, the company said it will spend $2.1 billion in cash and debt to buy Opti Canada Inc. to add supplies of extra-heavy oil used to make gasoline and diesel fuels.

Zijin Mining Group Co., China’s biggest gold producer by market value, tumbled 5.7 percent to HK$4.28 after a shareholder offered a 5.6 percent stake for sale at a discount.

Futures on the Hang Seng Index rose 0.7 percent to 21,985. The HSI Volatility Index, the benchmark gauge for Hong Kong stock options, sank 0.9 percent to 20.03, indicating options traders expect a swing of 5.7 percent in the Hang Seng Index in the next 30 days.

Contact the reporter on this story: Kana Nishizawa in Tokyo at +81-3-3201-8374 or knishizawa5@bloomberg.net

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