China Stocks Trading in Hong Kong Rise to One-Month High

Chinese stocks trading in Hong Kong rose to the highest level in a month after earnings from Agricultural Bank of China Ltd. to China Mengniu Dairy Co. topped estimates.

Agricultural Bank of China surged 3.4 percent after reporting higher profit and improving margins. China Mengniu Dairy gained the most since May after net income increased 25 percent. Anhui Conch Cement Co. jumped 4.8 percent after Goldman Sachs Group Inc. added the stock to its conviction buy list. Humanwell Healthcare (Group) Co. soared 10 percent in Shanghai as a gauge of drugmakers rose the most among 10 industry groups.

The Hang Seng China Enterprises Index climbed 1.6 percent to 9,849.63 at the close, while the Hang Seng Index added 0.7 percent. The Shanghai Composite Index dropped 0.2 percent to 2,063.67. The H-share gauge has rebounded 7 percent since entering a bear market on March 20 amid speculation the government is loosening funding restrictions for property developers and banks to support economic growth.

“We are seeing some technical rebound,” said Ben Kwong, chief operating officer at brokerage KGI Asia Ltd in Hong Kong. “Agricultural Bank’s results were upbeat, and earnings will be the key factor. The Hong Kong market is following the strength of Wall Street. We’re quite near the quarterly end so there’s some window dressing.”

The Bloomberg China-US Equity Index of the most-traded Chinese stocks in the U.S. added 0.2 percent to 97.80 in New York. U.S. stocks advanced for the first time in three days as economic data showed consumer confidence at a six-year high. Futures on the Standard & Poor’s 500 Index gained 0.1 percent.

Improved Earnings

Agricultural Bank of China, the first of the nation’s largest lenders to report 2013 earnings, gained 3.4 percent to HK$3.31. The third-largest Chinese lender’s fourth-quarter net income jumped 13 percent to 28.3 billion yuan ($4.6 billion) from a year earlier, according to Bloomberg calculations based on full-year profit. The results beat the 27.9 billion-yuan average estimate of 26 analysts surveyed by Bloomberg.

China Mengniu jumped 8.6 percent to HK$38.60 after its full-year profit climbed 25 percent to 1.63 billion yuan, beating analysts’ estimate of 1.5 billion yuan.

Of 181 companies in the Hang Seng Composite Index that posted annual earnings this month and for which Bloomberg had estimates, half beat profit projections and half missed. Bank of China Ltd. is among more than 30 companies in the Hang Seng due to report results today.

AAC Technologies Holdings Inc., which supplies speakers to Apple Inc., surged 12 percent to HK$37 after banks and brokerages including UBS AG and Daiwa Securities Group Inc. raised their rating on the stock following AAC’s fourth-quarter earnings that beat estimates.

China Discount

Anhui Conch, the biggest Chinese producer of the building material by market value, jumped 4.8 percent to HK$31.80. The stock had the steepest gain in the H-shares index.

Dah Sing Financial Holdings Ltd. dropped 8.9 percent to HK$32.30, its biggest slide since August 2011, after proposing to raise a combined HK$2.1 billion ($271 million) from selling shares at a discount. Its unit Dah Sing Banking Group Ltd. retreated 6.2 percent to HK$11.26.

The H-share measure has climbed since falling 20 percent from a December peak on March 20. Still, the gauge is down 10 percent this year through yesterday, heading for the worst first-quarter performance since 2008. Mainland shares are valued at a 4.1 percent discount to those traded in Hong Kong, the most since Jan. 22, according to the Hang Seng China AH Premium index.

Economic Stimulus

In Shanghai, Humanwell jumped by the daily limit after the company said it plans to sell as many as 113.6 million shares to five investors including its biggest shareholder to repay bank loans and boost working capital. The stock was also upgraded to buy at Shenyin & Wanguo Securities Co.

A gauge of health-care companies in the CSI 300 Index rose 1.2 percent, the steepest advance among 10 industry groups. The CSI 300 slipped 0.2 percent.

A measure of developers in the Shanghai index slid 1.4 percent, halting a three-day, 9.6 percent rally. Poly Real Estate Group Co. the second-biggest developer, fell 0.9 percent.

Chinese benchmark money-market rates jumped to the highest level in more than a month after the central bank drained funds from the financial system and as the yuan’s drop fueled speculation capital inflows may be slowing. The Chinese currency slipped 0.1 percent to 6.2094 yuan against the dollar.

Speculation is mounting that the People’s Bank of China will reconsider its stance against broad stimulus to help the country meet this year’s 7.5 percent growth target. A manufacturing report this week added to signs that the expansion is faltering in the world’s second-biggest economy, with a March reading for factory activity weakening for a fifth straight month.

Morgan Stanley

“The bad data is definitely fueling hopes that the PBOC will step in and stimulate the economy,” Dave Lutz, the head of ETF trading and strategy at Stifel Nicolaus & Co. in Baltimore, said yesterday.

Morgan Stanley is sticking to its buy recommendation on Chinese stocks, saying concern that there’ll be a “significant market disruption” in the world’s second-largest economy is overstated.

“The apparent deterioration in productivity and diminishing returns to leverage are not as severe as the consensus thinks,” Jonathan Garner, the head of Asia and emerging-markets strategy at Morgan Stanley, said in a report yesterday. “The Chinese economy is probably significantly larger than officially stated due to under-recording of consumption and services.”

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