Hong Kong Stocks Rise on China Speculation, G-7 Pledge
Hong Kong stocks rose, with its benchmark index gaining the most in a month, amid speculation China’s central bank will cut interest rates this month, and as leaders of the Group of Seven economies agreed to coordinate their response to Europe’s financial crisis.
Shimao Property Holdings Ltd. (813), a developer that gets all its revenue from mainland China, gained 3.6 percent. Esprit Holdings Ltd. (330), a clothier that counts Europe as its biggest market, climbed 2.8 percent. HSBC Holdings Plc, a lender that gets about a fifth of its revenue from North America, rose 2.6 percent after a report showed the U.S. services industry grew faster than expected. Zhaojin Mining Industry Co. rallied 11 percent Morgan Stanley recommended buying gold miners.
The Hang Seng Index advanced 1.4 percent to 18,520.53 at the close, the steepest gain since April 30. About six stocks rose for each that fell in the 49-member gauge. The Hang Seng China Enterprises Index (HSCEI) of mainland stocks, known as the H-Share index, gained 0.4 percent to 9,438.03.
Chinese policy makers will put in place “enough measures to get China to grow, absolutely,” said Khiem Do, Hong Kong- based head of Asian multi-asset strategy at Baring Asset Management (Asia) Ltd., which oversees about $8 billion. “For long-term investors this level is good but it’s not at bargain levels as we saw in October 2008, definitely not. But it is cheap.”
Shares on the Hang Seng Index (HSI) traded at 9.4 times estimated earnings on average yesterday. That compares with 7.6 times reached in October 2008, when global markets tumbled following the collapse of Lehman Brother Holdings Inc. The U.S. Standard & Poor’s 500 Index traded at 12.3 times yesterday, while Stoxx Europe 600 Index traded at 9.8 times.
Hong Kong’s benchmark index has advanced for two days after a 12 percent slide in the four weeks through June 1 erased the measure’s gains for the year. Stocks fell amid signs of slowing economic growth in U.S. and China and mounting concern about Europe’s debt crisis.
Hang Seng Index futures expiring this month climbed 2.1 percent to 18,495. The HSI Volatility Index (VHSI) sank 7.9 percent to 27.32, indicating traders expect a swing of about 7.8 percent in the benchmark index during the next 30 days.
The People’s Bank of China should cut interest rates at an appropriate time to boost confidence in the economy, according to a commentary on the front page of the China Securities Journal today, which is operated by the official Xinhua News Agency.
China is expected to enter a period of consecutive reserve requirement cuts in the second half, the China Daily reported today, citing Ba Shusong, an economist with the State Council’s Development Research Center.
A measure of property shares had the biggest gain among the Hang Seng Index’s four industry groups. Shimao gained 3.6 percent to HK$10.38, while Country Garden Holdings Co., which builds villas and apartments in mainland China, advanced 3.6 percent to HK$2.88.
Chinese lenders also rose. Agricultural Bank of China Ltd., the country’s third-biggest bank, climbed 1 percent to HK$3.14 and China Minsheng Banking Corp. advanced 3.1 percent to HK$7.29.
Finance ministers and central bank governors from the Group of Seven economies agreed to coordinate their response to Europe’s financial crisis on a conference call yesterday. G-7 officials said they will work together to help Spain and Greece place their public finances on a sustainable footing, Japanese Finance Minister Jun Azumi told reporters in Tokyo following the call.
“A substantial amount of Europe-related global economic damage is already embedded into market expectations,” said Michael Kurtz, Hong Kong-based global chief equities strategist at Nomura Holdings Inc., Japan’s largest brokerage. Stocks should “claw their way higher in coming weeks amid more evident policy support.”
Esprit rose 2.8 percent to HK$12.52, while Cosco Pacific Ltd., which operates a port in Greece, gained 1.9 percent to HK$9.
Futures on the Standard & Poor’s 500 Index climbed 1 percent today. The index advanced 0.6 percent in New York yesterday after the Institute for Supply Management’s index of non-manufacturing businesses, which covers about 90 percent of the economy, rose to 53.7 points last month from April’s 53.5. The median forecast of 75 economists surveyed by Bloomberg News projected 53.4. Readings above 50 signal expansion.
HSBC climbed 2.6 percent to HK$61.90 and Semiconductor Manufacturing International Corp., a chip services provider that receives more than half of its revenue from North America, advanced 3.2 percent to 25.5 Hong Kong cents.
Zhaojin Mining Industry surged 11 percent to HK$10.40 while Zijin Mining Group Co. (2899), a Chinese gold producer, rose 6.8 percent to HK$2.81. Morgan Stanley reiterated its overweight rating for gold miners. Shares of Zijin and Zhaojin are undervalued after declines this year, analysts Rachel Zhang and John Lam wrote in a report dated yesterday.
New World Development Co., a builder controlled by billionaire Cheng Yu-tung, rose 6.1 percent to HK$8.65, the steepest gain in the Hang Seng Index, after Bank of America Corp. named the stock as one of its top picks.
“Expectations for growth have been tempered to such a degree that economic data points are going to surprise to the upside,” said Stephen Corry, Hong Kong-based chief investment strategist at LGT Group, which oversees $12 billion of Asian assets. “There’s potential for more policy stimulus and markets are clearly oversold.”
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