Most Hong Kong stocks gained as Chinese manufacturing expanding faster than estimated, tempering concern that U.S. lawmakers’ inability to strike a budget deal will drag the world’s largest economy into recession.
Citic Pacific Ltd., which makes steel, mines iron ore and sells cars, climbed 2.5 percent. Techtronic Industries Co., a maker of power tools that counts North America as its biggest market, fell 1.6 percent. Property stocks, the best performing group in the Hang Seng Index, advanced, led by Hang Lung Properties Ltd., which rose 1.3 percent.
The Hang Seng Index was little changed at 22,656.92 at the noon close for the year in Hong Kong, after rising 0.1 percent and falling as much as 0.4 percent. The gauge is up 23 percent in 2012. A purchasing managers’ index rose to its highest level since May 2011, according to data from HSBC Holdings Plc and Markit Economics. The Hang Seng China Enterprises Index of mainland companies gained 0.5 percent to 11,436.16.
“We’ve got a very weak U.S. market and theoretically they are still concerned about the fiscal cliff problem, but the underlying sentiment in Hong Kong is very strong,” said Alex Wong, a Hong Kong-based director at Ample Capital Ltd. “The China PMI data is helping but there is probably not much further upside because we are still waiting for the outcome of the U.S. fiscal cliff.”
About nine stocks rose for every seven that fell on the broader Hang Seng Composite Index. Volume for the 50-member Hang Seng Index was 3.9 percent above the 30-day average, according to data compiled by Bloomberg.
Hong Kong’s benchmark index gained 23 percent for the year, its biggest annual increase since 2009, amid signs China’s economy is improving and as central banks around the globe added stimulus to boost growth. Shares on the measure traded at 11.9 times average estimated earnings, compared with 13.6 for the Standard & Poor’s 500 Index and 12.7 for the Stoxx Europe 600 Index, according to data compiled by Bloomberg.
Stocks pared declines after China’s manufacturing expanded at a faster pace in December, according to the final reading of a Purchasing Managers’ Index from HSBC Holdings Plc and Markit Economics today. The 51.5 figure, the highest since May 2011, compares with the 50.9 preliminary reading published Dec. 14 and 50.5 in November. A reading above 50 indicates expansion.
Citic Pacific gained 2.5 percent to HK$11.56. China Resources Power Holdings Co., the fourth biggest listed-power generation company in China, gained 1.4 percent to HK$19.78. China Longyuan Power Group Corp., a wind farm producer, gained 2.7 percent to HK$5.36.
“This improvement was mainly driven by an expansion of production, on the back of a strong increase in new business inflows,” said Xiaoping Ma, a China economist at HSBC Holdings Plc in a note today. “We expect Beijing to keep its pro-growth fiscal and monetary policy stance in place, and pursues an appropriate pace of growth in total social financing as well as tax cuts. Growth in infrastructure investment is expected to maintain strong momentum as there are still plenty key construction projects in the pipeline.”
Futures on the S&P 500 added 0.4 percent today. Senate Majority Leader Harry Reid rejected the latest Republican offer to resolve the crisis as Minority Leader Mitch McConnell reached out to Vice President Joe Biden to try to break the impasse.
Congress is working to avert more than $600 billion in tax rises and spending cuts, known as the fiscal cliff, and a failure risks a recession, the Congressional Budget Office has warned. The Senate will resume its session today.
Techtronic slid 1.6 percent to HK$14.36. Glorious Sun Ltd., a clothing manufacturer that gets 10 percent of its revenue from the U.S., fell 2.6 percent to HK$2.26. Man Wah Holdings Ltd., a sofa maker that gets half its sales from the U.S., dropped 2 percent to HK$6.46.
Property stocks gained the most, led by Hang Lung Properties Ltd., which rose 1.3 percent to HK$30.80. The Hang Seng Property index rose 0.2 percent. Wharf Holdings Ltd., the third-biggest developer in Hong Kong, gained 0.9 percent to HK$60.60.
Hong Kong developers have gained the most of any industry group in the Hang Seng Index this year, with the Hang Seng Property Index heading for a 38 percent gain.
Greentown China Holdings Ltd. gained the most in Hong Kong this year, rising 321 percent. New World Development Co., the Hong Kong property company controlled by the family of billionaire Cheng Yu-tung, led developers on the Hang Seng Index, gained 92 percent this year. China Overseas Land & Investment Ltd., the biggest Chinese real-estate company traded in Hong Kong, added 78 percent this year.
China Unicom (Hong Kong) Ltd., the nation’s second-largest mobile-phone company, was the worst performer on the Hang Seng Index this year, falling 24 percent, after losing the advantage as the only Chinese carrier to offer Apple Inc.’s iPhone with a service plan. It dropped the most in more than three years in October after third-quarter profit missed analysts’ estimates.
Silver Base Group Holdings, a Chinese distributor of high-end Wuliangye liquors and Fen Wine, fell the most in Hong Kong this year, sliding 59 percent to HK$2.50. The company, which reported on Dec. 2 a six-month loss of HK$194.5 million ($25.1 million), has shut two stores to alleviate rental pressure, the Standard newspaper reported Dec. 4, citing Chairman Liang Guoxing.
Futures on the Hang Seng Index fell 0.1 percent to 22,674. The HSI Volatility Index rose 3.7 percent to 17.8, indicating traders expect a swing of 5.1 percent for the equity benchmark in the next 30 days.