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Hong Kong Stocks Jump on Optimism About China Support

Chinese President Xi Jinping
Xi Jinping, China's president, said the nation needs to adapt to a “new normal” in the pace of economic growth and remain “cool-minded” amid a slowdown that analysts forecast will lead to the weakest expansion since 1990. Photographer: Goh Seng Chong/Bloomberg

May 12 (Bloomberg) -- Hong Kong stocks rose, with the benchmark index heading for its biggest gain in seven weeks, amid speculation China’s policy makers will take steps to bolster equities. Technology companies and brokerages jumped.

Citic Securities Co. surged 5.5 percent. Tencent Holdings Ltd., Asia’s biggest Internet company, gained the most on the Hang Seng Index. Uni-President China Holdings Ltd. dropped 6 percent after the noodle maker said it’s planning to raise HK$3.28 billion ($423 million) in a rights offer.

The Hang Seng Index rose 1.7 percent to 22,238.11 at the break in Hong Kong, set for the steepest advance since March 24. The Hang Seng China Enterprises Index, also known as the H-share index, added 1.7 percent to 9,847.74.

China’s State Council pledged to implement policies to improve the quality of and access to the nation’s stock, bond and commodities markets. The government will relax limits on foreign investment in listed companies and expand quotas for capital flow, the council said in a statement posted on the central government’s website at the end of last week after the close of trading.

“The market is concerned that the current leadership are not really focused on the economy or the financial markets,” said Erwin Sanft, head of China and Hong Kong equity research at Standard Chartered Plc. “The fact that the State Council came out with the statement talking about further opening up the capital markets shows that there is some attention being paid.”

The Hang Seng Index fell 6.2 percent this year through last week and the H-share gauge sank 10 percent as manufacturing to inflation data added to signs China’s economic momentum is ebbing. Reports on industrial production and retail sales are due tomorrow. The Hang Seng Index traded at 10.2 times estimated earnings at its last close, compared with 15.9 for the Standard & Poor’s 500 Index.

New Normal

Chinese President Xi Jinping said the nation needs to adapt to a “new normal” in the pace of economic growth and remain “cool-minded” amid a slowdown that analysts forecast will lead to the weakest expansion since 1990. China’s growth fundamentals haven’t changed and the country is still in a “significant period of strategic opportunity,” Xi said, according to a Xinhua News Agency report on the central government website on May 10.

The International Monetary Fund, which currently expects growth matching the government’s target of 7.5 percent this year, may lower its forecast, according to Changyong Rhee, director of the fund’s Asia and Pacific division.

Futures on the S&P 500 added 0.2 percent today. The U.S. equity benchmark climbed 0.2 percent on May 9 and the Dow Jones Industrial Average reached a record as Internet shares rebounded after a three-day selloff and Gap Inc. led retailers higher.

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

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

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