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Hong Kong Stocks Increase to Cap Second Straight Annual Advance

Dec. 31 (Bloomberg) -- Hong Kong stocks rose before the New Year holiday, with the city’s benchmark index capping its second straight annual advance.

Kunlun Energy Co., a gas supplier, climbed 1.6 percent today to lead increases on the Hang Seng Index. Hang Lung Properties Ltd., a developer that invests in mainland shopping malls, added 1.2 percent. Casablanca Group Ltd. slipped 0.8 percent after the bedding product maker said it expects a significant decline in 2013 profit.

The Hang Seng Index climbed 0.3 percent to 23,306.39 at the close, extending its rally this year to 2.9 percent. Trading hours were reduced today ahead of a holiday tomorrow. The Hang Seng China Enterprises Index of mainland shares, also known as the H-share index, added 0.4 percent to 10,816.14, paring its 2013 decline to 5.4 percent.

The Hang Seng Index rebounded 18 percent from its June low amid confidence in the world’s two biggest economies. The U.S. Federal Reserve this month gauged the recovery was strong enough to begin paring unprecedented stimulus. Chinese lawmakers unveiled the biggest policy shift since the 1990s last month, pledging to allow more private investment in state-controlled industries.

“Investors have gotten more optimistic from the first half of the year to the second half,” said Sam Chi Yung, a strategist at Delta Asia Securities Ltd. in Hong Kong. “I’m still optimistic about the Hong Kong market. The Hang Seng has the chance to get back to 24,000 or even higher in the coming January.”

Stock Rally

The Hang Seng Index traded at 11.1 times estimated earnings yesterday, compared with 16.7 for the Standard & Poor’s 500 Index. Futures on the benchmark U.S. equity index were little changed today, with the gauge on course for its biggest annual gain since 1997.

Conditions are in place to keep China’s economy and markets stable, and the government will implement prudent monetary policy and maintain “appropriate liquidity,” Premier Li Keqiang said during a Dec. 27 visit to Tianjin, according to a statement posted on the government’s website.

The nation’s debt including contingent liabilities rose about 13 percent in the six months through June, based on figures published yesterday by the National Audit Office.

“China’s local government debt numbers were less than the market expected,” helping push stocks higher today, Steven Leung, a director at UOB-Kay Hian Holdings Ltd., said by phone.

Strategists predict the Hang Seng Index will reach a 5 1/2-year high next year, according to eight forecasts in a Bloomberg News survey. The measure’s rally this year was the smallest behind Singapore among 24 developed markets tracked by Bloomberg, and compares with a 23 percent gain in 2012.

2013 Gains

The biggest gains on the benchmark gauge in 2013 were casino and technology stocks. Galaxy Entertainment Group Ltd., the Macau casino operator controlled by billionaire Lui Che-woo, soared 129 percent to become the best performer on the Hang Sang Index. Sands China Ltd.’s 87 percent surge pushed valuations to a three-year high this month, data compiled by Bloomberg show.

Spending on gaming in Macau, home to China’s only casinos, will rise 13 percent to 16 percent this month from a year earlier, according to UOB-Kay Hian analyst Victor Yip. Prospects for sustained revenue growth in Macau have prompted investors including BlackRock Inc. and Allianz Global Investors to favor casino stocks, according to the two fund management firms.

Tencent Holdings Ltd. jumped 99 percent this year, with Asia’s largest Internet company posting the second-largest gain on the Hang Seng Index and helping chairman Ma Huateng overtake property tycoon Wang Jianlin to become China’s second-richest man, according to the Bloomberg Billionaires Index.

Kunlun Energy advanced 1.6 percent today to HK$13.66. China Resources Power Holdings Ltd. rose 1.2 percent to HK$18.38. Hang Lung Properties added 1.2 percent to HK$24.50 while China Overseas Land & Investment Ltd., the biggest mainland real-estate company traded in Hong Kong, climbed 0.9 percent to HK$21.80.

To contact the reporter on this story: Jasmine Ng in Singapore at jng299@bloomberg.net

To contact the editor responsible for this story: Sarah McDonald at smcdonald23@bloomberg.net

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