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Hong Kong Stocks Advance on China Investment Prospects

Hong Kong stocks rose, with the benchmark index advancing for the first time in four days, after Premier Wen Jiabao’s call for more investment in infrastructure lifted railway and telecommunications shares.

China Railway Construction Corp. led gains in the sector. China Telecom Corp., the mainland’s biggest fixed-line carrier, gained 1.8 percent. Sun Hung Kai Properties Ltd. jumped 3.6 percent, leading developers higher after JPMorgan Chase & Co. raised its rating on the city’s largest property company.

“China has a little more leeway to stimulate the economy given the low inflation,” said Cedric Ma, Hong Kong-based senior investment strategist at Convoy Asset Management Ltd., which oversees the equivalent of $260 million. “They are trying to boost infrastructure investment to prop up the economy.”

The Hang Seng Index rose 0.1 percent to 19,419.87 at the close after earlier falling as much as 0.8 percent. Three shares gained for every two that fell on the 49-member gauge. Trading volumes were 0.9 percent from the 30-day average, according to data compiled by Bloomberg News.

The benchmark Hang Seng Index fell 10 percent from this year’s high in February on signs Europe’s debt crisis is worsening and growth is slowing in China and the U.S., dragging the value of shares on the gauge to 10.1 times estimated earnings on average. That compares with 12.9 times for the Standard & Poor’s 500 Index and 10.7 times for Stoxx Europe 600 Index.

The Hang Seng China Enterprise Index of mainland companies dropped 0.1 percent to 9,373.34, paring losses of as much as 1.3 percent. China’s economic growth rate probably slowed last quarter to 7.7 percent, the weakest pace in three years, according to the median estimate of 35 economists surveyed by Bloomberg. The gross domestic product data is due to be released on July 13.

Infrastructure Stocks

China’s railway and infrastructure-related companies advanced after Wen said promoting investment growth is the key to stabilizing China’s economic expansion.

The country needs to keep a certain level of economic growth to provide foundations for economic and social development and improving people’s livelihoods, Wen said in statement posted on the government’s website yesterday, summarizing discussions with economists and company executives held July 9-10.

China Railway Construction jumped 5.2 percent to HK$6.65. China Telecom added 1.8 percent to HK$3.48. Anhui Conch Cement Co., China’s largest cement maker, rose 2.8 percent to HK$20.45. China Communications Construction Co., the nation’s biggest builder by market value, climbed 5.2 percent to HK$7.10.

Hong Kong Developers

Sun Hung Kai Properties advanced 3.6 percent to HK$96.15, the most since the arrests of its co-chairmen by the city’s anti-graft body in March. JPMorgan raised its rating on the stock to overweight from underweight, saying investor concerns over the impact of increased land supply in Hong Kong on the developers’s profitability might be overblown.

Henderson Land Development Co., Hong Kong’s fourth-largest homebuilder by market value, gained 1.7 percent to HK$44.70. JPMorgan raised its rating to overweight from neutral.

Futures on the Hang Seng Index lost 0.2 percent to 19,395. The HSI Volatility Index fell 1.4 percent to 19.40, indicating traders expect a swing of about 5.6 percent in the benchmark index during the next 30 days.

Among stocks that fell, China High Speed Transmission Equipment Group Co., the nation’s biggest maker of wind-turbine gears, slipped 1.2 percent to HK$2.39 after predicting a significant decline in first-half profit.

China Construction Bank Corp., sank 3 percent to HK$4.93 after reported that it is a creditor to Zhejiang Zhongjiang Holding Co., a privately held chemicals supplier that’s undergoing debt reorganization.

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