Hong Kong Stocks Extend 2 1/2-Year High on China PMI

Hong Kong stocks climbed, with the city’s benchmark index extending a 2 1/2-year high, after gauges of China’s manufacturing growth beat estimates. Gains were limited as shares listed on the mainland tumbled.

China Shanshui Cement Group. climbed 4.9 percent on the factory data. Citic Securities Co. jumped 10 percent on expectations a government plan to end a ban on initial public offerings will benefit brokerages. Ping An Insurance (Group) Co. rose 4.2 percent after UBS AG said insurers will benefit from higher returns on preferred shares.

The Hang Seng Index rose 0.7 percent to 24,038.55 at the close in Hong Kong after capping its biggest advance since April 2011 last week. More than three stocks climbed for each that fell on the 50-member gauge. The Hang Seng China Enterprises Index, also known as the H-share index, added 0.9 percent to 11,548.07. The ChiNext index of small-cap Chinese shares plunged by a record on concern the IPO reform will divert funds from existing equities.

“People expect that rather than attracting new money into the market, people will just rotate out of their current holdings into the new names,” said Andrew Sullivan, director of sales trading at Kim Eng Securities in Hong Kong. “A lot of companies do not qualify to list in Hong Kong, or would not get permission to list here, so it doesn’t affect the Hong Kong market.”

China’s Purchasing Managers’ Index of manufacturing activity was 51.4 in November, according to government data released yesterday, exceeding 24 out 26 estimates in a Bloomberg News survey. A separate gauge from HSBC Holdings Plc and Markit Economics today was 50.8, topping all 13 analysts’ projections. Readings above 50 signal expansion.

China Shanshui rose 4.9 percent to HK$3.23. Anhui Conch Cement Co., China’s biggest maker of the building material, gained 2 percent to HK$30.85. Angang Steel Co. jumped at least 4.9 percent to HK$5.81.

Relative Value

The Hang Seng Index climbed 21 percent from its June low on signs China’s economy is stabilizing. The measure traded at 11.54 times estimated earnings, compared with 16.3 for the Standard & Poor’s 500 Index as of Nov. 29. The H-share index climbed 30 percent from this year’s low on June 25 after policy makers unveiled the biggest reform package since the 1990s.

China’s markets regulator on Nov. 30 issued a reform plan signaling an end to the more than one-year freeze on initial share sales. About 50 companies are expected to complete IPO approval preparations and list or be ready to do so by the end of January, the China Securities Regulatory Commission said. The regulator also proposed drafting rules for a trial program to allow companies to sell preferred stock.

Brokerages Surge

Citic Securities surged 10 percent to HK$21.60 to lead gains on the Hang Seng Index. China Galaxy Securities Co. jumped 11 percent to HK$7.09. Goldman Sachs Group Inc., Credit Suisse Group AG and UBS AG all said brokerages will benefit from IPO resumption in China. The resumption will be the main driver of their earnings next year, Credit Suisse said.

Ping An gained 4.2 percent to HK$75.30. China Life Insurance Co., the nation’s biggest company in the sector, advanced 2.8 percent to HK$25.70. Preferred stocks will provide 6 percent to 8 percent investment yield, and insurance companies may benefit as they are typically long-term investors, UBS said.

Chinese shares traded on the mainland declined, with the ChiNext falling a record 8.3 percent amid speculation new listings will divert funds from existing shares. The Shanghai Composite Index slid 0.6 percent.

IPO Drag

“The IPO plan is dragging stocks down,” said Xu Shengjun, analyst at Jianghai Securities Co. “With new stocks coming that are going to be much cheaper and more attractive, it’s ridiculous to want to buy the expensive small-caps.”

Futures on the S&P 500 were little changed today. The gauge dropped 0.1 percent on Nov. 29 as investors sold shares in the final half hour of a shortened trading session, erasing earlier gains from e-commerce companies as Black Friday online sales surged. U.S. brick-and-mortar retailers eked out a 2.3 percent sales gain on Thanksgiving and Black Friday, in line with a prediction for the weakest holiday results since 2009.