Hong Kong Stocks Rise Before ECB Plan; Rail Stocks Gain

Hong Kong stocks rose for the first time in three days as investors awaited a European Central Bank announcement on its bond-buying program today, overshadowing signs China’s economic slowdown is deepening. Chinese railway shares climbed after the government approved subway projects.

Esprit Holdings Ltd., a clothier that counts Europe as its largest market, rose 2.7 percent. CSR Corp., a Chinese train maker, jumped 8.8 percent, pacing gains among rail companies. Brilliance China Automotive Holdings Ltd., a partner of Bayerische Motoren Werke AG, slumped 6.8 percent after saying its controlling shareholder will sell a stake in the company.

The Hang Seng Index gained 0.3 percent to 19,209.30 at the close, with about three stocks rising for every two that fell in the 49-member gauge. Volume was 5.4 percent above its 30-day average for the time of day. The Hang Seng China Enterprises Index of mainland companies climbed 0.5 percent to 9,069.39.

“The market is waiting for more news to come out from the ECB meeting,” said Linus Yip, a Hong-based strategist at First Shanghai Securities. “The consensus is that the ECB will try to buy bonds, what matters is the amount. In China, there are talks about another hard landing. The economy is slowing, but there are a lot of tools the government can use to stabilize the economy.”

The Hang Seng Index traded at 10.2 times estimated earnings on average, compared with 9.4 times for the Shanghai Composite Index and 13.6 times for the Standard & Poor’s 500 Index. The Hong Kong gauge dropped 5.3 percent from its recent high on Aug. 14 amid concern demand will slow as economic reports signaled weakness in the global economy.

U.S. Futures

Futures on the S&P 500 rose 0.6 percent today. The index fell 0.1 percent in New York yesterday as London-based Markit Economics said euro-area services and manufacturing contracted more than initially estimated in August.

ECB President Mario Draghi’s bond-buying proposal involves unlimited purchases of government debt that will be sterilized to assuage concerns about printing money, two central bank officials briefed on the plan said. Draghi will hold a press conference after the ECB announces its interest-rate decision later today.

Esprit gained 2.7 percent to HK$12.32, while Cosco Pacific Ltd., a shipping company which operates a port terminal in Greece, advanced 2.6 percent to HK$9.81.

China Growth

Gains were limited today amid signs China’s economic slowdown is deepening. The nation’s government said yesterday industrial output will expand by about 10 percent this year, lowering its sights from an 11 percent goal given in December after weaker-than-anticipated domestic and overseas demand. Separately, Goldman Sachs Group Inc. cut its estimate for China’s 2012 growth to 7.6 percent from 7.9 percent and reduced its 2013 forecast to 8 percent from 8.5 percent.

CSR rose 8.8 percent to HK$5.20. China Railway Group Ltd., the nation’s largest construction company by total assets, climbed 7.1 percent to HK$3.17 while China Railway Construction Corp. increased 6.5 percent to HK$6.39.

China’s National Development and Reform Commission approved plans for subways in 18 cities including Suzhou, Hangzhou, Guangzhou, Tianjin and Shenzhen, the agency said on its website yesterday.

‘Meaningful Impact’

“Beijing is stepping up efforts to speed up infrastructure investment,” HSBC economists Hongbin Qu and Junwei Sun wrote in a report dated today. “This has a meaningful impact on growth, though the form of easing is of a relatively low profile. Once started, these projects are likely to filter through the economy quickly, given the strong track record of previous large stimulus packages.”

Brilliance China slumped 6.8 percent to HK$7.04 after resuming trading today. The company’s controlling shareholder Huachen Automotive Group Holdings Co. will sell 125 million shares in the company at HK$7.17 each, a discount to yesterday’s closing price of HK$7.55, Brilliance said in a statement to the city’s stock exchange.

Futures on the Hang Seng Index climbed 0.5 percent to 19,153. The HSI Volatility Index declined 4.1 percent to 19.87, indicating traders expect a swing of 5.7 percent for the equity benchmark in the next 30 days.

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