Hong Kong Stocks Rise on China Market Integration Plans

Hong Kong stocks rose, with the Hang Seng Index advancing for a second day, as China announced plans to boost the city’s integration with mainland financial markets ahead of President Hu Jintao’s visit this week.

China Overseas Land & Investment Ltd., the biggest Chinese homebuilder traded in Hong Kong, gained 4.3 percent on speculation China will do more to boost economic growth. Chow Tai Fook Jewellery Group Ltd. climbed 6.4 percent after saying profit rose by almost 80 percent. Hopewell Holdings Ltd., a property company controlled by billionaire Gordon Wu, jumped 9.5 percent after it agreed to pay the government HK$3.73 billion ($480 million) to proceed with a hotel project.

“Some people are excited about the news of so-called gifts from China for the 15th anniversary of the hand-over” of Hong Kong to the mainland, said Alex Au, managing director of Richland Capital Management Ltd. in Hong Kong, which oversees about $250 million. “Those new policies are not really anything exciting. The market is overreacting.”

Hong Kong’s Hang Seng Index rose 1 percent to 19,176.95 at the close, reversing losses of as much as 0.2 percent. Five shares rose for each that fell on the gauge. The measure retreated about 12 percent from this year’s high in February amid concern that growth in the U.S. and China is slowing, and as Europe’s debt crisis spread.

Bourse Cooperation

The Hang Seng China Enterprises Index of Chinese companies listed in Hong Kong gained 0.7 percent to 9,461.22. China will seek to strengthen its relationship with Hong Kong by promoting tie-ups between the two financial markets and increasing cooperation in investments overseas and infrastructure, the official Xinhua News Agency said today. President Hu is scheduled to visit the city June 29 to July 1.

“It’s not a game changer,” said Pauline Dan, Hong Kong-based chief investment officer at Samsung Asset Management Co., which manages $100 billion. “It may be positive for some corporations in Hong Kong but ultimately it doesn’t solve the problems we’re facing in the world today. Valuation are cheap, but I don’t see the broader market turning around just yet.”

Chinese developers and lenders advanced after the Shanghai Securities News reported the central bank may cut the reserve ratio requirement for banks next month. Separately, the China Securities Journal said in a commentary that the government may introduce “more proactive” policies to ensure stable growth.

China Overseas Land rose 4.3 percent to HK$17.94. China Resources Land Ltd., a state-owned developer, climbed 4.9 percent to HK$15.56. Industrial & Commercial Bank of China Ltd., the world’s biggest lender by market, gained 1 percent to HK$4.25.

Chow Tai Fook

Chow Tai Fook advanced 6.4 percent to HK$9.81 after reporting profit increased 79 percent in the year through March from the previous year as the jeweler benefited from increased luxury spending in China.

Hopewell Holdings jumped 9.5 percent to HK$22.00. The company said yesterday it plans to invest about HK$9 billion to build a 55-story conference hotel with 1,024 guest rooms in Hong Kong’s Wan Chai district.

Futures on Hong Kong’s benchmark stock index expiring this month gained 0.7 percent to 19,160. The HSI Volatility Index added 0.7 percent to 21.05, indicating options traders expect a swing of about 6 percent on the gauge during the next 30 days.

Among stocks that dropped, Glencore International Plc fell 3 percent to HK$36.25, an eighth day of decline, after Qatar Holding LLC asked the world’s largest publicly traded commodities supplier to raise its offer for Xstrata Plc.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE