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Hong Kong Stocks Halt Three-Day Slide on ICBC Earnings

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Oct. 31 (Bloomberg) -- Hong Kong stocks rose, with the city’s benchmark index advancing for the first time in four days, as Industrial & Commercial Bank of China Ltd. paced gains among lenders on better-than-expected profit.

ICBC, the world’s largest bank by market value, added 2 percent. China Railway Construction Corp. jumped 6.9 percent as the builder of rail links posted higher profit. Techtronic Industries Co., a power-tool maker that gets 72 percent of its sales in North America, gained 2.8 percent after U.S. home prices rose. Henderson Land Development Co., controlled by billionaire Lee Shau-kee, gained 1.2 percent after falling to an almost six-week low on a new city property tax.

The Hang Seng Index climbed 1 percent to 21,641.82 at the close, extending this month’s advance to 3.9 percent. Almost five shares rose for each that fell on the 49-member gauge. The Hang Seng China Enterprises Index of mainland companies gained 1.2 percent to 10,582.05.

“Investors are positive on ICBC among banking shares, but they will keep monitoring whether the sector will see net-interest margins contract,” said Patrick Yiu, Hong Kong-based managing director at Cash Asset Management Ltd., which oversees HK$100 million ($13 million). “People think China’s economy may bottom out and it will raise valuations for Chinese stocks.”

The Hang Seng Index rose 19 percent from this year’s low on June 4 on speculation China’s economy may be stabilizing and as central banks across the globe added stimulus to prop up growth. Hong Kong’s benchmark index traded at 11.3 times average estimated earnings today, compared with 13.5 for the Standard & Poor’s 500 Index and 12 for the Stoxx Europe 600 Index, according to data compiled by Bloomberg.

ICBC Advances

ICBC rose 2 percent to HK$5.13 after reporting third-quarter net income of 62.4 billion yuan ($10 billion), topping analysts’ estimates. The bank may earn a record 226.1 billion yuan this year, according to the average of 32 analyst projections in a Bloomberg survey, compared with 208.3 billion yuan in 2011.

Banks accounted for about 62 percent of today’s advance on the Hang Seng Index. China Construction Bank Corp., the nation’s second-largest lender by assets, advanced 2.3 percent to HK$5.84.

A wave of global stimulus has been flooding markets with liquidity, adding to the risk of asset bubbles in places such as Hong Kong and China. The city on Oct. 26 announced its first property tax targeted at overseas buyers to cool home prices. Hong Kong’s monetary authority yesterday sold its own currency for the fifth time in less than two weeks after reaching the upper limit of its peg to the U.S. dollar.

China Railway

China Railway Construction jumped 6.9 percent to HK$7.70 after the company reported third-quarter profit increased 41 percent from a year earlier to 1.9 billion yuan.

Futures on the S&P 500 gained 0.6 percent today, with U.S. stock trading to resume after two days of closures as Hurricane Sandy swept through New York. The S&P/Case-Shiller index of property values in 20 cities rose 2 percent in the year ended in August from a year earlier, the biggest year-to-year gain since July 2010, the group said yesterday.

Companies that do business in the U.S. advanced, with Techtronic adding 2.8 percent to HK$14.76. Li & Fung Ltd., a supplier of toys and clothes to Wal-Mart Stores Inc., gained 0.9 percent to HK$13. Man Wah Holdings Ltd., a sofa maker that gets about half of sales from the U.S., rose 3.3 percent to HK$4.77.

Developers Rebound

The Hang Seng Property Index gained 1.4 percent, climbing a second day after capping the biggest drop in seven months on Oct. 29. Henderson Land, which gets 90 percent of its revenue in Hong Kong, gained 1.2 percent to HK$53.70. New World Development Co., which depends on the city for most of its sales, added 2 percent to HK$11.98.

Among stocks that fell, PetroChina Co., the nation’s biggest producer of oil and natural gas, dropped 2 percent to HK$10.58. The company said third-quarter profit fell to its lowest in at least five years due to refining losses and natural-gas import costs.

Of the 44 companies on the Hang Seng Composite Index that have reported earnings this month and for which estimates are available, 27 missed expectations, according to data compiled by Bloomberg.

The HSI Volatility Index dropped 4.5 percent to 15.97, indicating traders expect a 4.6 percent swing in the equity benchmark in the next 30 days. Futures on the Hang Seng Index rose 1 percent to 21,674.

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

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