Most Hong Kong Stocks Rise as China Manufacturing Expands

Most Hong Kong stocks advanced, with a gauge of Chinese equities climbing to its highest since August 2011, after retail sales in the city rose more than estimated and China’s manufacturing expanded.

China Resources Power Holdings Co. jumped 3.7 percent as utilities gained on speculation greater factory output will mean more demand for electricity. Luk Fook Holdings International Ltd. climbed 3.5 percent as a report showed Hong Kong’s retail sales increased 8.8 percent in December. China Oilfield Services Ltd. fell 1.7 percent as BNP Paribas lowered its rating after the oil drilling services company rose to a 21-month high this week.

The Hang Seng Index closed little changed at 23,721.84, erasing losses of as much as 0.7 percent. About four shares rose for every three that fell on the Hang Seng China Enterprises Index, which climbed 0.7 percent after sliding as much as 1.2 percent. Both gauges had dropped as an official purchasing managers’ index expanded less than economists had forecast. That was countered by a separate survey from HSBC Holdings Plc and Markit Economics that showed an acceleration.

“Stocks went down at first on worse-than-expected official PMI, then the investors start to ponder if it’s just a seasonal effect,” Li Jun, a strategist at Central China Securities Co., said from Shanghai. “When HSBC PMI was better-than-expected, the worry was removed, so stocks went up again. However in the longer term, it’s harder for the stock market to continue this rally because it’s already risen a lot and most reasons have been priced in.”

Chinese New Year

The Hang Seng Index rallied the past five months, the longest such streak since July 2009, after the U.S. Federal Reserve embarked on a third round of quantitative easing in September and on optimism China’s recovery will continue. Asia’s biggest economy is expected to expand 7.5 percent to 9 percent this year, a Bloomberg survey last week showed.

Trading volume on the Hang Seng Index was 1.3 percent above the 30-day moving average at the time, according to data compiled by Bloomberg. Shares on the gauge traded at 11.5 times estimated earnings, compared with 13.6 for the Standard & Poor’s 500 Index.

“Right now the sentiment is very polarized, it comes down to individual stock performance,” said Alex Wong, an asset-management director at Ample Asset Management Ltd. in Hong Kong. Unless the Hong Kong government makes a policy announcement about property, “we will probably see little movement in the index,” ahead of the Chinese New Year holidays.

Financial markets in Hong Kong will be shut for Chinese New Year holidays from Feb. 11 through Feb. 13, while those in the mainland will be closed from Feb. 11 through Feb. 15.

China Recovery

China’s official PMI, a gauge for manufacturing activity, unexpectedly fell last month as export orders contracted and production slowed.

The reading was 50.4 in January, the National Bureau of Statistics and China Federation of Logistics and Purchasing said today in Beijing as they more than tripled the number of companies surveyed to 3,000. That compares with a median estimate of 51 in a Bloomberg News survey of 33 analysts and 50.6 in December. A figure above 50 indicates expansion.

A separate survey conducted by HSBC Holdings Plc and Markit Economics showed the January PMI rose to 52.3 from 51.5 in December.

Chinese utilities advanced. China Resources Power gained 3.7 percent to HK$22.25. China Oil & Gas Group Ltd. rose 4.1 percent to HK$1.28. ENN Energy Holdings Ltd. added 3.2 percent to HK$38.35.

Hong Kong retailers gained after the city’s December retail sales increased 8.8 percent compared with an analysts’ estimate of 7.6 percent, according to a report released yesterday.

Luk Fook gained 3.5 percent to HK$28.15. Cosmetic retailers L’Occitane International SA and Sa Sa International Holdings Ltd., rose 4.5 percent to HK$24.35 and 2.1 percent to HK$7.15 respectively.

Developers Fall

Chinese developers dropped after China’s new home prices rose 1 percent in January, according to SouFun Holdings Ltd., the country’s biggest real estate website owner. Rapid price gains may spark concern about policy tightening, Alan Jin, a Hong Kong-based analyst at Mizuho Securities Asia Ltd., wrote in an email.

China Overseas Land & Investment Ltd., the biggest Chinese real estate company listed in Hong Kong, fell 2.3 percent to HK$23.50. China Resources Land Ltd., a state-owned developer, decreased 2.5 percent to HK$23. Guangzhou R&F Properties Co. dropped 1 percent to HK$13.94.

China Oilfield Services declined 1.7 percent to HK$16.52. BNP Paribas cut its rating to hold from buy after the stock climbed to a 21-month high this week.

The Hang Seng Volatility Index sank 5.9 percent to 12.70, indicating options traders expect a swing of 3.6 percent in the next 30 days. Futures on the Hang Seng Index slipped 0.1 percent to 23,756.

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