Hong Kong Stocks Advance as U.S. Optimism Tempers Euro Concern
Hong Kong’s Hang Seng Index (HSI) rose for a third day, extending its longest winning streak in a month, as optimism about the strength of the U.S. economy outweighed concern Europe may be headed for recession.
Techtronic Industries Co. (669), a maker of power tools that counts North America as its largest market, gained 2 percent. China Coal Energy Co., a unit of the country’s second-biggest producer of the fuel, gained 3.8 percent after net income rose. Huaneng Power International Inc. (902) sank 2.5 percent after a report said mainland electricity consumption may slow. Ocean Grand Holdings Ltd. (1220), an aluminum products maker, plunged 64 percent when it resumed trading after being suspended since 2006.
The Hang Seng Index rose 0.8 percent to 19,151.94 at the 4 p.m. close, with almost three stocks gaining for each that fell on the 48-member gauge. Shares advanced the past two days on speculation China’s government will ease monetary policy.
“The strong outlook and underpinnings of the U.S. economy are much more important to the Asian market outlook than European uncertainty,” said Sandy Mehta, Hong Kong-based chief executive officer of Value Investment Principals Ltd. “We think the Europe situation remains difficult and presents risk, but much of this is already discounted by investors and the situation will be more stable by mid-year.”
The Hang Seng China Enterprises Index (HSCEI) of mainland companies listed in Hong Kong increased 1 percent to 10,517.07. A report to be released tomorrow is expected to show that Chinese consumer prices rose 4 percent in December from a year earlier, according to the median estimate of economists in a Bloomberg survey. The inflation rate was 4.2 percent in November.
The Hang Seng Index tumbled 20 percent last year amid concern global growth would slow as China took steps to curb inflation and Europe struggled to contain its debt crisis. That compares with the Standard & Poor’s 500 Index break-even year and an 11 percent drop for the Stoxx Europe 600 Index.
Companies in the Hong Kong gauge traded at 9.6 times forecast earnings at the last close, down from 14.4 times at the beginning of 2011, according to data compiled by Bloomberg. The S&P 500 Index is trading at 12.3 times.
“Hong Kong and China markets are particularly attractive and very timely right now, reflecting close to trough valuations and relative underperformance last year,” Value Investment’s Mehta said. “There is expectation of substantial easing coming up in China in the next few months. It’s one of the few places in the world with ample ammunition to ease and stimulate growth.”
Techtronic rose 2 percent to HK$8.51. HSBC Holdings Plc (HSBA), a lender that gets a fifth of its revenue from North America, gained 1 percent to HK$60.45.
U.S. employers hired 4.15 million workers in November, 107,000 more than in October, the Labor Department said yesterday. Economists expect a report tomorrow will show retail sales rose last month, according to a Bloomberg survey.
German Growth Slows
In Europe, a report today showed Spanish industrial production shrank the most in two years in November. Germany’s economic growth slowed last year, increasing 3 percent after gaining 3.7 percent in 2010, the Federal Statistics Office said.
“There are more positive signs particularly on employment and consumer” spending in the U.S., said Stephen Halmarick, Sydney-based head of investment markets research at Colonial First State Global Asset Management, which oversees about $150 billion. “The outlook in the U.S. is for modest growth this year, and that’s better than Europe. Expectations are Europe will be in a recession.”
China Coal Energy (1898) gained 3.8 percent to HK$9.47 after saying in a preliminary announcement its net income rose 36 percent in 2011.
The London Metal Exchange Index (LMEX) of prices for six industrial commodities including copper and aluminum advanced 2.9 percent yesterday. Jiangxi Copper Co., China’s No. 1 producer of the metal, rose 3 percent to HK$18.10 while United Co. RUSAL, a Russian aluminum company, climbed 5 percent to HK$5.05.
Mainland Power Consumption
Among stocks that fell, Huaneng Power declined 2.5 percent to HK$4.33 after Xinhua News Agency reported China’s electricity consumption may grow 8.5 percent this year compared with 11.7 percent in 2011 as the economy slows.
Hong Kong & China Gas Co. slid 0.9 percent to HK$18.20 after Royal Bank of Scotland NV rated the stock “sell” in a new coverage.
Ocean Grand Holdings tumbled 64 percent to 67 Hong Kong cents as it resumed trading, its biggest drop since at least September 1997. Trading in the company was halted in 2006 after it said 842 million yuan ($133 million) went missing from its subsidiaries.
Futures on the Hang Seng Index increased 0.9 percent to 19,168. The HSI Volatility Index (VHSI) retreated 2.9 percent to 22.77 today, indicating options traders expect a swing of 6.5 percent in the benchmark over the next 30 days.
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