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Hong Kong Stocks Advance on China Stimulus Speculation

May 28 (Bloomberg) -- Hong Kong stocks advanced for a second day after Premier Wen Jiabao called for more government support to help China’s poorest regions, while a report showed profit declined at mainland industrial companies.

China Overseas Land & Investment Ltd., the biggest Chinese developer listed in Hong Kong, climbed 4.1 percent. Esprit Holdings Ltd., a clothier that counts Europe as its biggest market, gained 2 percent as concern eased that Greece may exit the euro. Gome Electrical Appliances Holding Ltd., an electronics retailer, sank 4.6 percent after its first-quarter profit plunged 88 percent.

The Hang Seng Index rose 0.5 percent to 18,800.99 at the close, erasing earlier losses of as much as 0.2 percent. Almost two shares gained for each that fell on the gauge. The Hang Seng China Enterprises Index of mainland stocks advanced 1.1 percent to 9,647.79. Trading volumes in Hong Kong were about 32 percent less than the 30-day average, according to data compiled by Bloomberg News.

“China is a little bit of a concern, but China has policy levers,” Binay Chandgothia, a Hong Kong-based portfolio manager at Principal Global Investors, which manages $250 billion globally, said on Bloomberg Television. “They can use policy incentives to get growth back on track.”

The benchmark Hang Seng Index is heading for an 11 percent decline this month, the most since September, on concern Europe’s debt crisis will worsen and amid signs China’s economic slowdown is deepening. Shares on the gauge traded at 9.5 times estimated earnings on average as of May 25, compared with 12.6 times for the Standard & Poor’s 500 Index and 10 times for the Stoxx Europe 600 Index.

Wen’s Call

Wen, while visiting a remote region in Hunan province, called for extra government support for the nation’s poorest areas, the official Xinhua News Agency reported yesterday. The country should speed up important infrastructure projects and improve health care services in impoverished regions, he was cited as saying.

Chinese lenders and developers advanced. China Overseas Land climbed 4.1 percent to HK$16.40. China Resources Land Ltd., a state-owned homebuilder, increased 3.4 percent to HK$14.14. China Construction Bank Corp., the nation’s second-largest lender, rose 1.2 percent to HK$5.21. Industrial & Commercial Bank of China Ltd., the world’s biggest lender, added 1.1 percent to HK$4.67.

China’s automakers rallied after Reuters reported the government will provide subsidies to car buyers who trade in used vehicles for fuel-efficient ones. Great Wall Motor Co., the nation’s largest maker of pickup trucks, jumped 11 percent to HK$16.16. Dongfeng Motor Group Co., a partner of Nissan Motor Co. and Honda Motor Co., climbed 8 percent to HK$13.48.

Greek Opinion Polls

The Hang Seng Index has fallen about 13 percent from this year’s peak as political uncertainty in Europe stoked concern governments will struggle to contain the region’s debt crisis. Greek opinion polls showed voters warming to parties supporting the European Union’s bailout agreement as political leaders at home and abroad warned of economic catastrophe should the single currency fragment.

Companies that do business in Europe gained today. Esprit climbed 2 percent to HK$12.50. Cosco Pacific Ltd., which operates a port in Greece, increased 1.1 percent to HK$9.22.

Futures on the Hang Seng Index expiring this month added 0.7 percent to 18,687. The HSI Volatility Index slid 2.7 percent to 27.83, indicating that traders expect swings of about 8 percent in the next 30 days.

Gome Electrical Appliances slumped 4.6 percent to HK$1.26 after saying profit dropped 88 percent to 67 million yuan ($11 million) in the three months ended March 31.

To contact the reporter on this story: Jonathan Burgos in Singapore at

To contact the editor responsible for this story: Nick Gentle at

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