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Hong Kong Stocks Climb as Slower Growth Fans Policy Bets

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Sept. 10 (Bloomberg) -- Hong Kong stocks rose, with the city’s benchmark index extending last week’s gains, amid speculation central banks will take more steps to boost growth amid signs of slowing economic expansions in China and abroad.

ZTE Corp. rose 6.3 percent after a report the equipment manufacturer won an order to make China Mobile Communications Corp.’s fourth-generation handsets. Pacific Basin Shipping Ltd., a dry-bulk ship operator, gained 2.9 percent after agreeing to sell ships. China Construction Bank Corp., the nation’s second-largest lender by assets, dropped 2.1 percent after terms of sale obtained by Bloomberg showed shareholders are selling about $530 million of its stock.

The Hang Seng Index gained 0.1 percent to close at 19,827.17, with about four shares gaining for each that fell on the 49-member gauge. Volume on the index was more than double the 30-day average as China’s President Hu Jintao said the economy faces “notable downward pressure,” signaling the country may add to road and rail projects announced last week. The U.S. Federal Reserve meets this week to discuss whether to expand asset purchases, known as quantitative easing.

“People are quite bullish because the prospect of QE3 in the U.S. and the bond buying by the European Central Bank are supportive,” said Alex Wong, asset-management director at Ample Asset Management Ltd. in Hong Kong. “For China, people are not concerned because the government is finally doing something to try and stimulate the economy.” In Hong Kong, the “accumulated short interest in the market is huge so we would probably be in the phase of short covering for a while.”

The Hang Seng China Enterprises Index of mainland companies, or the H-share index, slipped 0.4 percent to 9,393.60.

Short Selling

The total short selling by value on Hong Kong’s mainboard rose 37 percent last week to HK$6.78 billion ($874 million), according to data compiled by Bloomberg.

The Hang Seng Index traded at 10.6 times estimated earnings on average, compared with 9.8 for the Shanghai Composite Index and 13.9 for the Standard & Poor’s 500 Index. The Hong Kong gauge climbed 8.9 percent from this year’s low on June 4 through Sept. 7 amid optimism central banks will take more steps to boost the slowing economies.

Futures on the Standard & Poor’s 500 Index fell 0.3 percent today, ahead of this week’s Fed policy meeting. The underlying index gained 0.4 percent on Sept. 7 amid stimulus bets after Labor Department figures showed U.S. nonfarm payrolls increased by 96,000 in August, less than the median estimate of 130,000 in a Bloomberg survey of economists. Fed Chairman Ben S. Bernanke said on Aug. 31 that the weak jobs market posed a “grave concern.”

China Output

“Following the weak U.S. jobs report, the backdrop is ideal to act this week and deliver more quantitative easing,” said George Boubouras, Melbourne-based head of investment strategy at UBS AG’s Australian wealth management unit. The Swiss bank has about $1.5 trillion in assets under management. “This week is looking like the last window for the Fed to act,” before the U.S. election.

China’s biggest lenders were the heaviest drags on the Hang Seng Index today, led by China Construction Bank. Industrial & Commercial Bank of China Ltd., the world’s No. 1 lender by market value, dropped 2.1 percent to HK$4.26.

China Construction Bank slid 2.1 percent to HK$5.07. A total of 810 million Hong Kong-listed shares are being offered at HK$5.08 ($0.65) each, about a 2 percent discount to the closing price on Sept. 7, according to terms for the sale obtained by Bloomberg. Names of the selling shareholders were not disclosed.

In China, industrial output grew at the slowest pace in three years. Production increased 8.9 percent in August from a year earlier and fixed-asset investment growth in the first eight months eased to 20.2 percent, the National Bureau of Statistics said yesterday in Beijing.

Imports Fall

Exports rose 2.7 percent in August from a year earlier while imports fell 2.6 percent, resulting in a trade surplus of $26.7 billion, the customs bureau said today in Beijing. The increase in overseas shipments compares with the median estimate for 2.9 percent growth from analysts in a Bloomberg News survey. Economists forecast import gains of 3.5 percent and a trade surplus of $19.5 billion.

“China is also supportive because they are spending money on infrastructure again, that’s another factor making people happy,” said Ample Asset Management’s Wong.

ZTE Advances

ZTE gained 6.3 percent to HK$10.42 after Apple Daily said it was among companies to win tender to make China Mobile’s first 4G mobile phones, with total order value of several billion yuan, citing affiliate Sharp Daily. Shares rose even after ZTE denied reports that it won part of the order. China Wireless surged 10 percent to HK$1.54.

Pacific Basin Shipping rose 2.9 percent to HK$3.50 after the company agreed to sell its six roll-on, roll-off vessels for 153 million euros ($196 million), quitting the sector after three years to resume its focus on commodity carriers and tugs.

Lonking Holdings Ltd., a construction equipment maker, surged 9.1 percent to HK$1.32, extending last week’s gains after China announced roads-to-subway approvals to revive economic growth. China Railway Construction Corp. advanced 2.7 percent to HK$6.84.

Futures on the Hang Seng Index retreated 0.2 percent to 19,821. The HSI Volatility Index declined 0.5 percent to 18.60, indicating traders expect a swing of 5.3 percent for the equity benchmark in the next 30 days.

To contact the reporter on this story: Kana Nishizawa in Hong Kong at knishizawa5@bloomberg.net

To contact the editor responsible for this story: Nick Gentle at ngentle2@bloomberg.net

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