Hong Kong Stocks Advance on U.S., China; Esprit Declines

Hong Kong stocks rose for the first time in three days amid growing confidence on the outlook for China’s growth and optimism U.S. policy makers will reach a budget deal. Esprit Holdings Ltd. slumped after saying it may post a first-half loss.

Techtronic Industries Co., a maker of power tools that counts North America as its biggest market, climbed 7 percent. China Shenhua Energy Co. advanced 3.2 percent after the coal producer’s equity rating was raised at Bocom International Holdings Co. Esprit, a clothier that last month raised money from a rights offer, fell 4.5 percent to lead declines after missing earnings estimates for five years.

The Hang Seng Index rose 0.6 percent to 22,623.37 at the close, the highest finish since Aug. 1, 2011. About four stocks advanced for each that declined on the 50-company measure, with volume 5.6 percent above the 30-day average for the time of day, according to data compiled by Bloomberg. The Hang Seng China Enterprises Index of mainland companies increased 0.8 percent to 11,388.40.

“Confidence is coming back for China’s economy,” said Michiya Tomita, a Hong Kong-based fund manager at Mitsubishi UFJ Asset Management Co., which oversees $70 billion. “Investors are expecting the U.S. fiscal cliff problem will be solved, many are drawing an optimistic outlook. The Hang Seng Index may reach 27,000 next year.”

Hang Seng Advance

Hong Kong’s benchmark index advanced 22 percent this year through yesterday, almost erasing last year’s drop, as economic reports from the U.S. and China signaled growth in the world’s two largest economies. Shares on the measure traded at 11.8 times average estimated earnings yesterday, compared with 13.9 for the Standard & Poor’s 500 Index and 12.7 for the Stoxx Europe 600 Index, according to data compiled by Bloomberg.

S&P 500 futures were little changed today. The gauge rose 1.2 percent yesterday, capping the biggest two-day gain in a month on the benchmark measure.

President Barack Obama proposed a budget plan that would cut about $1.2 trillion in federal spending and raise a similar amount in taxes in the next decade, according to a person familiar with the talks. House Speaker John Boehner said he will push a budget “plan B” measure that would include tax increases on income of more than $1 million, countering Obama’s proposal while also softening the Republican stance on taxes.

Techtronic Advances

Stocks linked to the U.S. advanced. Techtronic gained 7 percent to HK$15.38. Li & Fung Ltd., a supplier of toys and clothes to Wal-Mart Stores Inc., rose 1.8 percent to HK$13.76. Sofa maker Man Wah Holdings Ltd., which gets more than 50 percent of sales from the U.S., climbed 3.1 percent to HK$6.38.

More investors than ever say they are bullish about China’s economic outlook, a Bank of America Corp. monthly survey showed. Some 67 percent of money managers polled predicted China’s economy will grow at a faster rate next year, the highest reading since the survey started in 2003.

China Shenhua Energy advanced 3.2 percent to HK$33.65 after Bocom International raised its rating on the stock to long-term buy from neutral. Australia’s Whitehaven Coal Ltd. said it hasn’t received approaches to buy assets from China Shenhua Energy or any proposal from the Chinese company to acquire Whitehaven, denying a report in the Australian Financial Review.

Esprit Tumbles

Wharf (Holdings) Ltd. climbed 4 percent to HK$60.10 after the Hong Kong builder’s target price was raised to HK$67.90 from HK$62.45 at Daiwa Securities Group Inc., which maintained a buy rating.

Among stocks that fell, Esprit dropped 4.5 percent to HK$11.16, the steepest drop in the Hang Seng Index. The company said it may post a loss in the first half ending Dec. 31 due to worse-than-expected operating results. The stock was cut to reduce from neutral at Nomura Holdings Inc., which cited weak retail conditions in Europe where Esprit gets most its sales.

Futures on the Hang Seng Index rose 0.5 percent to 22,615. The HSI Volatility Index fell 0.1 percent to 15.66, indicating traders expect a swing of 4.5 percent for the equity benchmark in the next 30 days.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE