Hong Kong stocks rose, with the benchmark index gaining the most in more than 15 weeks, as Morgan Stanley upgraded the outlook for Hong Kong stocks and amid speculation that the Chinese government may widen the yuan’s trading band within the next three days.
China Resources Land Ltd., the No. 2 mainland property company traded in Hong Kong, jumped 5.4 percent as developers extended yesterday’s gains. Mainland banks rose as the Hang Seng Financial index recovered from its lowest level since December, led by a 4 percent gain for Industrial & Commercial Bank of China Ltd., the world’s largest lender by market value. Lenovo Group Ltd., the world’s No. 2 personal computer maker, advanced 9.5 percent after a report that it’s in talks to buy a server business from International Business Machines Corp.
The Hang Seng Index gained 2.3 percent to 22,013.57 at the close, its biggest increase since Jan. 2. All but five stocks climbed on the 50-member gauge, with volume 18 percent above the 30-day average. For the week, daily turnover on the city’s stock exchange averaged HK$60.3 billion ($7.77 billion), 16 percent less than the daily average so far this year, according to data compiled by Bloomberg.
The benchmark index ended the week 0.3 percent lower after almost erasing the losses of the previous four trading days. The Hang Seng China Enterprises Index of Chinese companies listed in the city rose 2.1 percent to 10,483.60.
“The turnover remains extremely low; I think this is only a technical factor,” said Alex Wong, a Hong Kong-based director at Ample Capital Ltd. “For Chinese banks, I think this is only a recovery after the earlier sell-off because they had been under severe pressure. If you compare the rebound today to the sell off earlier, it’s very minor.”
Through yesterday the Hang Seng Index had fallen 5.1 percent this year, the worst performance among developed markets, according to data compiled by Bloomberg. Shares on the measure traded at 10.4 times estimated earnings, compared with a five-year average of 12.3 and the Standard & Poor’s 500 Index’s multiple of 13.9, data compiled by Bloomberg show.
Morgan Stanley raised its outlook for stocks in the MSCI Hong Kong Index to overweight, according to a report written by analyst Jonathan Garner, citing strong earnings revisions and undemanding valuations.
Mainland banks gained in Hong Kong, with Industrial & Commercial Bank up 4 percent to HK$5.26. Agricultural Bank of China Ltd., the nation’s No. 3 lender, rose 3.8 percent to HK$3.53. China Construction Bank Corp., the No. 2 lender on the mainland, added 3.7 percent to HK$6.24.
China may expand the range within which it lets the yuan trade, timing the move during the Group of 20 nations meetings in Washington this week, UBS analysts Manik Narain and Geoffrey Yu wrote in a note after central bank Deputy Governor Yi Gang signaled policy makers will loosen control over the currency. The trading band will be widened “in the near future,” Yi said during the International Monetary Fund meeting April 17.
“The market is expecting the renminbi will have better performance and that will attract more liquidity to the Hong Kong stock market,” Lewis Wan, Hong Kong-based chief investment officer at Pride Investments Group Ltd., which oversees about $250 million.
Chinese developers extended yesterday’s gains. China Resources Land jumped 5.4 percent to HK$23.35, while China Overseas Land & Investment Ltd., the largest mainland property company traded in Hong Kong, rose 5.8 percent to HK$23.75.
Home prices in China’s tier-1 cities may rise 10 percent, while property prices nationwide might rise as much as 5 percent this year, Haibin Zhu, chief China economist at JPMorgan Chase & Co., said yesterday. Mainland developers climbed yesterday as new home prices jumped in all but two cities after local governments announced milder-than-expected property measures and targets.
Mining companies gained as global commodity prices rebounded. Jiangxi Copper Co., the country’s biggest producer of the metal, rose 3.2 percent to HK$15.38. Zijin Mining Group Co., the biggest mining company in China by value, rose 2.7 percent to HK$2.29. Gold producer Zhaojin Mining Industry Co. added 3.7 percent to HK$8.42.
Lenovo gained 9.5 percent to HK$7.06, the biggest gain on the Hang Seng Index, amid speculation it will buy a server unit from IBM. The division, which sells servers running x86 processors, may fetch $2.5 billion to $4.5 billion, depending on what assets and liabilities are included, said a person familiar with the matter, who asked not to be named because the negotiations are private.
China Unicom Hong Kong Ltd., the nation’s second-largest mobile-phone company, surged 7.3 percent to HK$10.26, while China Telecom Corp., a wireless carrier, climbed 3.9 percent to HK$3.77 after the companies were rated overweight by Morgan Stanley. China Everbright Ltd. soared 8.6 percent and Citic Securities Co. jumped 7 percent after UBS AG raised ratings on the brokerages. Growth in the industry’s margin-financing balance accelerated in the first quarter, UBS said.
Futures on the Standard & Poor’s 500 Index rose 0.6 percent. The gauge yesterday fell 0.7 percent as earnings from UnitedHealth Group Inc. to EBay Inc. disappointed investors, a measure of manufacturing in the Philadelphia region expanded at a slower pace and the Conference Board’s index of U.S. leading economic indicators unexpectedly declined for the first time in seven months.
Hang Seng Index futures rose 2.2 percent to 22,004. The HSI Volatility Index fell 2.9 percent to 17.17, its biggest drop in a month, indicating traders expect a swing of 4.9 percent for the equity benchmark in the next 30 days.