Hong Kong Stocks Rise With Cement Makers; Esprit Plunges

Hong Kong stocks rose as cement makers advanced after a report the government may relax lending rules for developers. Esprit Holdings Ltd. suspended trading after the resignation of its chief executive officer prompted shares to tumble.

Brilliance China Automotive Holdings Ltd., a maker of minibuses and sedans, increased 2.1 percent after China said it will give subsidies to replace some commercial vehicles. Anhui Conch Cement Co. gained 4.3 percent after the 21st Century Business Herald reported China may relax rules on lending to local government financing vehicles and property developers. Esprit, a clothier that counts Europe as its largest market, tumbled 22 percent, its biggest drop in almost 15 years, before trading in the stock was suspended.

The Hang Seng Index rose 0.8 percent to 19,026.52, the highest close since May 29, after falling as much as 0.3 percent. More than twice as many stocks rose as retreated on the 49-member gauge. Volume on the gauge was about 24 percent below its 30-day average, according to data compiled by Bloomberg. The Hang Seng China Enterprises Index of mainland stocks advanced 1.5 percent to 9,658.47.

“Investors should pick up specific stocks that are cheap, rather than broadly buying in,” said Naoki Fujiwara, who helps oversee about $6.6 billion at Shinkin Asset Management Co. in Tokyo. “Investors are cautious ahead of Greece’s election, leading to fluctuations in the market. We can’t deny the possibility of Greece’s exit from the euro, and that would be the worst scenario.”

Europe Crisis

Stocks fell earlier after Andrew Colquhoun, Fitch Ratings’ head of Asia-Pacific sovereign ratings, said the euro zone is more likely to “muddle through” than break up. If Greece exits the currency bloc and there is material contagion to the periphery, all 17 members would likely face downgrades, he said. Greece holds elections June 17 that may determine the country’s future in the euro.

Hong Kong’s benchmark index has tumbled 12 percent from this year’s high on Feb. 29 amid slowing economic growth in the U.S. and China and concern Europe’s debt crisis is worsening. Shares on the Hang Seng Index traded at 9.8 times estimated earnings on average yesterday, compared with 12.7 times for the Standard & Poor’s 500 Index and 10.2 times for the Stoxx Europe 600 Index.

Brilliance China increased 2.1 percent to HK$7.67 while Sinotruk Hong Kong Ltd. rose 0.7 percent to HK$4.30.

Auto Subsidy

China will give as much as 18,000 yuan ($2,826) in subsidies for the replacement of some trucks and buses, the Ministry of Finance said on its website today.

Building-material makers gained. Anhui Conch gained 4.3 percent to HK$22.95, while China Shanshui Cement Group climbed 4 percent to HK$6.03.

China may relax lending rules for local government financing vehicles and property developers in the near term, the 21st Century Business Herald reported today, citing unidentified bankers.

Agile Property Holdings Ltd., a developer, advanced 1.6 percent to HK$10.06, while China Overseas Land & Investment Ltd., a developer controlled by the nation’s construction ministry, rose 1.9 percent to HK$17.48.

Esprit tumbled 22 percent to HK$10.54, the biggest drag on the Hang Seng Index, after saying CEO Ronald Van der Vis is leaving “for personal and family reasons.” The resignation came amid efforts to turn around the clothing retailer from an earnings slump. Trading in the shares was suspended from 1:30 p.m.

Profit Warning

Li Ning Co., a sportswear retailer founded by the former Olympics gymnast of the same name, slumped 3.1 percent to HK$5.09. Bank of America Corp. said the company’s turnaround could take longer than expected and de-stocking could continue into first half of 2013. The stock tumbled 8.1 percent yesterday after the company said it expects a “substantial” profit decline for 2012 from a year earlier.

Digital China Holdings Ltd., a system integration services provider, surged 11 percent to HK$13.76 after saying its sales for the 12 months ended March 31 rose 24 percent from a year earlier.

Hang Seng Index futures expiring this month climbed 0.9 percent to 18,933. The HSI Volatility Index slid 1.1 percent to 26.38, indicating traders expect a swing of about 7.6 percent in the benchmark index during the next 30 days.