Hong Kong Stocks Rise From 6-Month Low as Casinos Rebound
Hong Kong stocks rose, with the city’s benchmark index rebounding from its lowest level in six months, as casino operators and energy producers rallied.
Sands China Ltd. (1928), a unit of billionaire Sheldon Adelson’s Las Vegas gaming company, led gains on the Hang Seng Index (HSI) after tumbling yesterday by the most since October 2011 amid a slump in Macau’s gambling revenue. China Shenhua Energy Co., the nation’s biggest coal producer, jumped 5.8 percent, paring this year’s loss to 16 percent. Lenovo Group Ltd. (992) slid 2.4 percent as Nomura Holdings Inc. downgraded the shares.
The Hang Seng Index added 0.7 percent to 21,423.13 at the close in Hong Kong, after falling to its lowest level since July 10 yesterday. About three stocks advanced for each that fell on the 50-member gauge. The Hang Seng China Enterprises Index (HSCEI) of mainland Chinese companies, known as the H-share index, advanced 0.7 percent to 9,537.71.
“In the medium term, casinos are still relatively good stocks because their fundamentals are very sound,” said Jackson Wong, vice president of Tanrich Securities in Hong Kong. “They are always speculative stocks and we saw heavy selling pressure the last few days. The market is in a very oversold territory so a lot of people are trying to bottom fish but they’re only in for a short-term trade.”
Hong Kong’s benchmark index entered a so-called correction this week after falling at least 10 percent from its recent peak in December as manufacturing reports from China to the U.S. disappointed investors. The H-share measure has dropped 12 percent since Dec. 2. China’s markets are closed for holidays until tomorrow.
Sands China jumped 11 percent to HK$60.60. Galaxy Entertainment Group Ltd. (27), the Macau casino operator controlled by billionaire Lui Che-woo, increased 7.3 percent to HK$71.10. The two stocks tumbled more than 7 percent yesterday.
Gambling sales in Macau grew 7 percent in January, the slowest pace since October 2012, official data showed yesterday. Investors overreacted to the pre-Lunar New Year weakness because high-spending customers typically visit Macau toward the end of the holiday period, according to Deutsche Bank AG analyst Karen Tang. China’s new year holidays began Jan. 31 and end today.
Shenhua Energy climbed to HK$20.65 in its biggest rally since August. The stock was the second-worst performer on the Hang Seng Index this year through yesterday. The stock traded at 7.1 times estimated earnings yesterday, almost half its five-year average, according to data compiled by Bloomberg. China Coal Energy Co. (1898), the nation’s second-biggest miner of the fuel by market value, increased 2.8 percent to HK$4 and traded at 9.7 times estimated earnings.
“Valuation-wise, coal stocks are cheap,” said Tanrich’s Wong. “Some funds are trying to buy relatively safer bets after heavy selling pressure in strong sectors.”
A report tomorrow will probably show U.S. businesses added 183,000 employees in January after a 74,000 increase in December, according to a survey of economists by Bloomberg. HSBC Holdings Plc and Markit Economics report data on China’s services industry tomorrow.
Lenovo, which announced $5 billion of deals last month to bolster its server and smartphone businesses, slid to HK$8.31, its lowest close since Oct. 31. Nomura reduced its recommendation on the shares to neutral and cut its price target. The acquisitions of International Business Machines Corp.’s low-end x86 server unit and Motorola Mobility may result in short-term losses for Lenovo, analysts including Leping Huang, wrote in a note.
The H-share gauge is the worst performer this year after Japan’s Nikkei 225 Stock Average among global benchmark indexes, according to data compiled by Bloomberg. The Chinese measure traded yesterday at 6.3 times projected 12-month earnings, the cheapest since October 2011.
Futures on the Standard & Poor’s 500 Index rose 0.2 percent today, after the gauge slid 0.2 percent yesterday. U.S. companies added 175,000 jobs in January, the smallest increase in five months, a report from ADP Research Institute in Roseland, New Jersey showed yesterday. A separate report showed a gauge of service industries advanced more than forecast.
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