Hong Kong stocks rose the most in two weeks after European leaders surprised investors with a deal easing rules for emergency loans to Spanish banks and making it easier to recapitalize the region’s troubled lenders.
Shares also advanced on speculation President Hu Jintao will offer measures to boost Hong Kong’s economy during a three-day visit starting today to mark the 15th anniversary of the city’s return to Chinese rule. Hutchison Whampoa Ltd., a port operator that gets about half its sales in Europe, added 2.3 percent. Hong Kong Exchanges & Clearing Ltd. gained 2.9 percent after saying it will develop derivative products with mainland bourses.
The Hang Seng Index rose 2.2 percent to 19,441.46 at the close, the biggest gain since June 15. All but one stock rose on the 49-member gauge, which pared its quarterly decline to 5.3 percent. The Hang Seng China Enterprises Index of mainland stocks advanced 2.6 percent to 9,574.84 today.
“News on Spain is what we wanted to hear from the summit,” said Francis Lun, managing director at Lyncean Holdings Ltd., a Hong Kong-based brokerage. “Obviously the market is jubilant.”
The Hang Seng benchmark index has fallen about 10 percent from this year’s peak in February amid concern economic growth is slowing in the U.S. and China as Europe’s crisis spreads. Companies on the gauge traded at 10.1 times estimated earnings on average, compared with 12.8 for the Standard & Poor’s 500 Index and 10.4 for the Stoxx Europe 600 Index.
Euro-area leaders meeting at a summit in Brussels agreed to ease repayment rules for emergency loans to Spanish banks after the first day of the summit. Leaders dropped the requirement that governments get preferred creditor status on crisis loans to Spain’s blighted banks, European Union President Herman Van Rompuy said. Banks can also be recapitalized directly with funds rather than going through governments, he said.
Stocks that do business in Europe rose. Hutchison Whampoa gained 2.3 percent to HK$66.50. Cosco Pacific Ltd., which operates a port in Greece advanced 5.3 percent to HK$10.50. Standard Chartered Plc, a London-based bank, added 3.5 percent to HK$169.80.
Hong Kong Exchanges & Clearing gained 2.9 percent to HK$110 after announcing a joint venture yesterday to develop cross-border indexes and products with Shanghai and Shenzhen stock exchanges. The partners will each invest HK$100 million ($12.9 million) in the new company, to be established within three months of yesterday’s signing of the agreement.
Hang Seng Index futures climbed 2.4 percent to 19,449. The HSI Volatility Index fell 8.2 percent to 20.4, indicating traders expect a swing of about 5.8 percent in the benchmark index during the next 30 days. The measure of volatility fell to its lowest level since May 4.