Hong Kong Stocks Cap Six-Week Rise on Manufacturing Data

Hong Kong stocks rose, with the benchmark index capping its longest weekly winning streak since October, on signs of strength in global manufacturing. Property developers led the advance.

China Resources Land Ltd., the second-biggest mainland developer traded in Hong Kong, rose 3.7 percent to lead gains on the Hang Seng Index amid signs the government is easing property curbs. Shares of Esprit Holdings Ltd., a clothier that counts Europe as its biggest market, and Techtronic Industries Co., a maker of power tools that gets 73 percent of its sales from North America, advanced after factory activity in the regions expanded. Hutchison Whampoa Ltd., controlled by Li Ka-shing, gained 4.5 percent after first-half earnings beat expectations.

The Hang Seng Index gained 0.5 percent to 22,190.97 at the close in Hong Kong for a 1 percent weekly gain to complete a six-week advance. Volume today was 44 percent lower than the 30-day average. Less than three stocks rose for each that dropped. Shares climbed yesterday after China’s manufacturing unexpectedly strengthened in July. The Hang Seng China Enterprises Index added 0.1 percent to 9,734.81.

“The biggest concern is China, and it’s been a drag on Hong Kong and Asian markets,” said Louis Wong, a fund manager at Phillip Securities HK Ltd. “The better-than-expected July manufacturing will ease market concerns, so we expect increasing fundflow into Asia.” Expanding factory activity in Europe and the U.S. are also helping sentiment, he said.

The Hang Seng Index fell 2.1 percent this year, the worst performance among developed markets tracked by Bloomberg, as growth weakened in China and on concern the Federal Reserve will taper stimulus in the U.S. The gauge traded at 10.59 times estimated earnings, compared with 15.5 for the Standard & Poor’s 500 Index.

Global Manufacturing

Futures on the S&P 500 climbed 0.1 percent today. The equity gauge surged 1.3 percent in New York yesterday, topping 1,706.87 for the first time after U.S. manufacturing expanded at the fastest pace in two years. The Institute for Supply Management’s factory index jumped to 55.4 in July, exceeding the highest estimate in a Bloomberg survey of economists.

Investors are awaiting U.S. employment data today that may give clues as to when the Federal Reserve will start paring $85 billion in monthly bond purchases. Payrolls may rise by 185,000 in July, with the jobless rate expected to fall to 7.5 percent from 7.6 percent, according to a Bloomberg survey.

The European Central Bank said it would keep interest rates low and that the worst was over for the region. Euro-area manufacturing expanded at a faster pace than initially estimated in July as industrial growth resumed after two years of contraction amid signs the economy is pulling out of a record recession.

Exporters Advance

Companies that do business in the U.S. and Europe gained. Esprit rose 4.1 percent to HK$13.58, while Techtronic advanced 3.3 percent to HK$19.42.

The Hang Seng China Enterprises Index, also known as the H-share index, has fallen as much as 27 percent from a Feb. 1 high this year, meeting some investors’ definition of a bear market. The measure traded at 1.18 times the value of net assets today, 33 percent lower than its five-year average of 1.77.

Developers gained. China Resources Land jumped 3.7 percent to HK$22.35. China Overseas Land & Investment Ltd., the largest mainland property company traded in Hong Kong, added 4.2 percent to HK$23.40.

Beijing’s average new home price in July rose to a record, Beijing News reported, citing data from the government and Centaline Property. Most mainland developers will report double-digit earnings growth in the first-half, according to a Credit Suisse Group AG report on July 23.

Property Market

Property stocks led gains this week on the Hang Seng Index after China’s ruling Politburo endorsed “stable and healthy” development of the property market, the government said on its website after a meeting led by President Xi Jinping this week.

“The Politburo meeting didn’t mention they’re going to further tighten measures on the property market so it’s taken in a positive light,” said Phillip Securities’ Wong. “There is no further bad news affecting the sector. But the government will remain vigilant on the property market if there are signs of overheating.”

Hutchison Whampoa surged 4.5 percent to HK$91.65 after its first-half net income jumped 23 percent from a year earlier on growth at its infrastructure business.

Materials and energy companies led declines this year on the Hang Seng Composite Index through yesterday on concern demand will weaken as China’s economy slows. Information technology and utility shares were the biggest gainers.

Zoomlion Upgraded

Zoomlion Heavy Industry Science and Technology Co., China’s second-largest construction equipment maker, rose 3.2 percent to HK$5.87 after Macquarie Group Ltd. raised its rating on the stock to neutral from underperform.

Daphne International Holdings Ltd., a footwear retailer that sells Aerosoles shoes in China, jumped 9 percent to HK$5.95. The stock is rebounding after a cut to the company’s profit forecast prompted a recent selloff, according to KGI Securities Co.

Brilliance China Automotive Holdings Ltd., a partner of Bayerische Motoren Werke AG, climbed 2.7 percent to HK$10.02. China’s passenger vehicle sales volume will extend first-half growth on demand from inland provinces, Citigroup Inc. analysts led by Paul Gong wrote in a report dated yesterday.

Hang Seng Index futures rose 0.7 percent to 22,148. The HSI Volatility Index fell 6.6 percent to 16.11, indicating traders expect a swing of 4.6 percent for the equity benchmark in the next 30 days.

Before it's here, it's on the Bloomberg Terminal.