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Hong Kong Stocks Rise on Coal Companies; Utilities Slide

July 17 (Bloomberg) -- Hong Kong’s Hang Seng Index rose for a third day, led by mainland coal producers. China Resources Power Holdings Co. plunged on a report the utility overpaid for an acquisition.

China Shenhua Energy Co., the nation’s biggest coal miner by market value, surged 5.3 percent after revenue rose last month. Luk Fook Holdings International Ltd. added 6 percent after the jeweller’s same-store sales jumped and gold traded near a three-week high ahead of Federal Reserve Chairman Ben S. Bernanke’s policy report. China Resources Power dropped the most in four years to lead declines on the equity benchmark.

The Hang Seng Index climbed 0.3 percent to 21,371.87 at the close in Hong Kong after falling as much as 0.3 percent. Trading volume was 44 percent lower than the 30-day average. About the same number of shares declined as rose. The Hang Seng China Enterprises Index of mainland shares climbed 0.7 percent to 9,480.85.

“Recent growth data from China have been disconcerting to investors, but the Hang Seng Index overreacted last month,” said Sandy Mehta, chief executive officer of Value Investment Principals Ltd. in Hong Kong. “Equities are very attractive from a valuation perspective. We do think that Chinese growth is currently stabilized around 7 percent and will not see further slippage.”

The Hang Seng Index has rebounded 2.7 percent after posting its biggest monthly decline in a year in June, on speculation China may act to ease a deepening slowdown. The government this week reported 7.5 percent economic growth in the second quarter, down from 7.7 percent in the first three months of the year, as factory output weakened.

Relative Value

Shares on the benchmark Hang Seng Index traded at 10.16 times estimated earnings, compared with 15.2 times for the Standard & Poor’s 500 Index and 13.2 for the Stoxx Europe 600 Index, according to data compiled by Bloomberg.

Chinese Premier Li Keqiang yesterday said the nation will seek to keep economic growth, employment and inflation within limits, avoiding “wide fluctuations,” without elaborating on what the government deems acceptable.

Deutsche Bank AG co-Chief Executive Officer Anshu Jain said efforts to bolster China’s domestic consumption to boost the nation’s economic growth poses risks.

“It’s the right strategy for them in the long run,” Jain said in an interview with Bloomberg Television’s Haslinda Amin today in Singapore. “If there is something to watch closely in China, it would be the implications of that shift from infrastructure spending.”

China FDI

Shares extended gains in early trading after China’s Ministry of Commerce said foreign direct investment rose 20 percent in June to $14.4 billion. The monthly total was the highest in data going back to 1997 and the largest increase in more than two years.

The Hang Seng Composite Index slid 6.1 percent this year, led by materials and energy companies amid speculation China’s slower growth will curb demand.

Futures on the S&P 500 were little changed today. The U.S. equity index dropped 0.4 percent yesterday in New York as Coca-Cola Co.’s profit dropped and after Fed Bank of Kansas City President Esther George said the U.S. was on the “right path” for recovery and that cuts in the pace of stimulus are “appropriate.”

Bernanke bolstered the rally last week after he backed sustained monetary easing. The central bank chairman will deliver his semi-annual monetary policy report to Congress starting today.

Jewellers Advance

Gold prices rose as investors awaited the Fed’s next move. Luk Fook gained 6 percent to HK$22.10 after quarterly same-store sales in Hong Kong and Macau surged 83 percent, while they more than doubled in China. Chow Sang Sang Holdings International Ltd., a gold and gem-set jewelry retailer, jumped 6 percent to HK$17.28.

China Shenhua climbed 5.3 percent to HK$21.80, leading gains on the Hang Seng Index after saying coal sales rose 28 percent in June from a year earlier. China Coal Energy Co., the country’s second-largest producer of the fuel, increased 3 percent to HK$4.10.

VIP baccarat, which accounts for 68 percent of Macau’s total gaming revenue, rose 9.8 percent to $7.2 billion in the first quarter, halting a six-quarter decline, according to data compiled by Bloomberg Industries. Macau, the world’s largest gaming hub, reported revenue of $38 billion last year.

Galaxy Entertainment Group Ltd., a casino operator controlled by billionaire Lui Che-woo, rose 1.2 percent to HK$38.70.

China Resources Power tumbled 10 percent to HK$17.98. Xinhua News Agency posted a letter on its website by one its reporters that said the utility and the chairman of its state-owned parent overpaid for the 2010 acquisition of Shanxi province coal assets. The company’s spokesman was not available for comment.

iPhone Delay

AAC Technologies Holdings Inc., which supplies speakers for Apple Inc. smartphones, retreated 5 percent to HK$36.05. The iPhone 5S may be delayed to year-end due to design changes, according to a Commercial Times report citing unidentified people in the semiconductor industry.

Hang Seng Index futures climbed 0.2 percent to 21,303. The HSI Volatility Index slid 2.5 percent to 19.86, indicating traders expect a swing of 5.7 percent for the equity benchmark in the next 30 days.

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

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

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