Hong Kong Stocks Rise on U.S. Data, Fed; China Developers Jump

Hong Kong stocks rose, with the Hang Seng Index paring its biggest monthly drop since May 2012, as U.S. data boosted the outlook for the world’s largest economy and amid assurances the Federal Reserve won’t soon end stimulus efforts. Chinese property developers jumped.

Techtronic Industries Co., a maker of power tools that gets 73 percent of its sales from North America, gained 3.1 percent. China Overseas Land & Investment Ltd., the largest mainland property company traded in Hong Kong, rose 4.6 percent on speculation the government will remove a ban on refinancing for real-estate development to help ease a credit crunch. Industrial & Commercial Bank of China Ltd., the world’s second-largest lender, increased 2.7 percent.

The Hang Seng Index gained 1.8 percent to 20,803.29, capping a 2.7 percent advance for the week. About seven stocks advanced for each decliner. The index slid 7.1 percent for the month. The Hang Seng China Enterprises Index, the world’s third-worst-performing major gauge this quarter, climbed 1.7 percent to 9,311.44 and capping its worst first half since 2008. Hong Kong markets will be shut on July 1 for a holiday.

“The market has found the bottom for the short term already,” said Peter Lai, director of sales at brokerage DBS Vickers Hong Kong Ltd. “It’s on an upward trend as current levels are too low. The markets recently overreacted to hint of withdrawal of U.S. stimulus. The Fed’s signal and good economic figures are boosting confidence.”

Shares also climbed after Shanghai Securities News reported the southern Chinese province of Guangdong may let qualified individuals begin investing in securities listed on the Hong Kong stock exchange. The Hang Seng Index extended its gains in late trading as the Shanghai Composite Index rebounded near close of trading, fueled by ICBC and PetroChina, China’s largest energy company.

Tools, Openings

The Hang Seng China Enterprises Index, also known as the H-share index, has fallen more than 20 percent from its Feb. 1 high, meeting some investors’ definition of a bear market. The measure traded at 6.6 times estimated earnings on June 25, 39 percent below its five-year average and the lowest since October 2008, according to data compiled by Bloomberg.

Stocks tumbled after China’s overnight repurchase rate rose to a record last week as Premier Li Keqiang seeks to wring speculative lending out of the banking system after credit expansion outpaced economic growth. China’s central bank will use various tools to adjust liquidity, People’s Bank of China Governor Zhou Xiaochuan said at the Lujiazui forum in Shanghai today. It will also continue to encourage opening of money, foreign exchange and bond markets, Zhou said.

Cash Crunch

The seven-day repurchase rate reached a record 12.45 percent on June 20. It fell 58 basis points today to 6.16 percent, taking this week’s slide to 309 basis points, the most since February 2011, according to a weighted average compiled by the National Interbank Funding Center.

ICBC climbed 2.7 percent to HK$4.89 today, while Agricultural Bank of China Ltd., the nation’s No. 3 lender, increased 1.3 percent to HK$3.20.

China’s Shanghai Composite Index capped its biggest monthly retreat since 2009. Fitch Ratings Ltd. yesterday cut its 2013 growth forecast for China, saying a jump in interbank rates this month on tighter monetary conditions is likely to “pose further headwinds.”

Concern that higher interbank rates would crimp earnings at the nation’s three biggest banks dragged their valuations to near book level on June 25. ICBC and China Construction Bank Corp. were trading at 1.3 times on May 20, the recent high for the Hang Seng Index, while Agricultural Bank was at 1.2 times.

China Slump

Chinese companies have dropped out of the ranks of the world’s 10 biggest stocks by market value for the first time since 2006 amid a cash crunch, slower growth and the biggest U.S. stock rally in a decade.

Futures on the Standard & Poor’s 500 Index gained 0.3 percent. The gauge yesterday advanced 0.6 percent, completing its biggest three-day rally since January.

Consumer spending in the U.S. rebounded in May following the largest drop in more than three years. Household purchases, Commerce Department figures showed yesterday in Washington. Incomes advanced 0.5 percent, more than projected.

More Americans signed contracts in May to buy previously owned homes than at any time in more than six years. Claims for unemployment benefits decreased by 9,000 to 346,000 last week, indicating employers are slowing the pace of job cuts.

Fed Bank of New York President William C. Dudley said in New York yesterday that the central bank may prolong its asset-purchase program if the economy’s performance fails to meet its forecasts. Fed Governor Jerome Powell said in Washington that asset purchases may be scaled back later this year if growth holds up, and any such trimming depends on economic data rather than the calendar.

Yue Yuen

Techtronic increased 3.1 percent to HK$18.56, while Yue Yuen Industrial (Holdings) Ltd., which makes shoes for Nike Inc., gained 1.6 percent to HK$20.10.

Developers advanced. China Overseas Land jumped 4.6 percent to HK$20.35, and Guangzhou R&F Properties Co., a builder in the southern Chinese city, gained 3.9 percent to HK$11.22. China Resources Land Ltd., the second-biggest mainland developer traded in Hong Kong, increased 4.2 percent to HK$21.20.

Chinese-listed companies that have property-related businesses may be able to apply for fund-raising and restructuring without completely spinning off their property arms, 21st Century Business Herald reported today, citing a property company general manager it didn’t identify.

Property stocks rallied on speculation they will be allowed to sell new shares and bonds to fund development and to ease an industry cash crunch, said Wu Kan, a Shanghai-based fund manager at Dazhong Insurance Co., which oversees $285 million.

Auto Inventories

Great Wall Motor rose 1.4 percent to HK$33.45. BYD Co., the Chinese auto company partially owned by Warren Buffett’s Berkshire Hathaway Inc., climbed 1 percent to HK$25.70 and Geely Automobile Holdings Ltd., a unit of the Chinese owner of Volvo Cars Corp., advanced 1.8 percent to HK$3.36 after the China Automobile Dealers Association said average inventories at auto dealers fell in May.

Hengan International Group Co., a producer of snacks and hygiene products, surged 7.2 percent to HK$84.50, the steepest gain on the Hang Seng Index. China Mobile Ltd., the world’s largest phone company by subscribers, gained 4.1 percent to HK$81. China’s consumer staples, telecoms and brokers are among sectors preferred on strong balance sheet and visible earnings growth, Jefferies Hong Kong Ltd. said.

Among stocks that fell, Biostime International Holdings Ltd., a supplier of baby-care products, slumped 7.6 percent to HK$43.50 after announcing one of its units was under investigation for alleged anti-monopoly law violations.

Hang Seng Index futures rose 1.4 percent. The HSI Volatility Index slid 15 percent to 20.17, indicating traders expect a swing of 5.8 percent for the equity benchmark in the next 30 days.

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