Hong Kong Stocks Rise to 3-Year High on Manufacturing

Hong Kong stocks rose, with the city’s benchmark index gaining to a three-year high, as a gauge of mainland manufacturing topped analyst estimates.

Great Wall Motor Co. advanced 7.4 percent as China International Capital Corp. recommended the shares after the automaker posted preliminary results. Ping An Insurance (Group) Co. jumped 3.7 percent, providing the biggest boost to a gauge of mainland equities. Agile Property Holdings Ltd. climbed 5.6 percent as Chinese developers rallied. Huadian Power International Corp. slumped 6.8 percent after the utility announced a share placement.

The Hang Seng Index climbed 0.7 percent to 24,141.50 in Hong Kong today, the highest close since April 11, 2011. The Hang Seng China Enterprises Index, a gauge of Chinese shares traded in the city, added 1.1 percent to 10,939.57. Stocks rallied as the flash China manufacturing purchasing managers’ index by HSBC Holdings Plc and Markit Economics came in at 52 for July, beating economist estimates for a reading of 51.

“Obviously you are seeing an improvement, which is a good sign and indicates that mini stimulus is working,” said Pauline Dan, Hong Kong-based head of greater China equities at Pictet Asset Management Ltd. “There’s definitely more room to rally because the market is still very cheap.”

Today’s report, known as the flash PMI, is typically based on 85 percent to 90 percent of responses to surveys sent to purchasing managers at more than 420 companies. The final reading is due Aug. 1. Estimates of today’s number by 21 analysts ranged from 50.5 to 51.5.

The index reading was the highest since January 2013 and increased from 50.7 in June, when the gauge moved into growth territory for the first time this year. Levels above 50 signal expansion.

Targeted Stimulus

The Hang Seng China Enterprises Index, known as the H-share measure, rebounded 19 percent from a March 20 low on signs China’s economy is stabilizing as policy makers deployed targeted stimulus to counter a slowdown. It closed at its highest since Dec. 18 today.

Most of China’s provinces said their economies accelerated in the second quarter, suggesting local leaders are sharpening their focus on growth. Twenty of 25 provinces and provincial-level cities that have reported first-half expansion through yesterday indicated a pickup, based on local-government data and state-media articles compiled by Bloomberg News.

Relative Value

The H-share gauge traded at 7.6 times estimated earnings today, compared with 8.4 for the Shanghai Composite Index and 16.7 for the Standard & Poor’s 500 Index yesterday, according to data compiled by Bloomberg.

Futures on the S&P 500 added 0.1 percent today after the gauge advanced to a record yesterday as Apple Inc. boosted technology companies and health-care shares rallied on earnings.

Great Wall Motor added 7.4 percent to HK$32.50, leading gains on the H-share index, after the stock’s rating was raised to buy from hold at CICC. The carmaker reported first-half net income of 3.96 billion yuan ($639 million), compared with 4.09 billion yuan a year earlier.

Ping An Insurance advanced 3.7 percent to HK$64.20 and China Life Insurance Co. added 2.6 percent to HK$22.00. They were the biggest contributors to today’s gains on the H-share gauge. UBS AG, JPMorgan Chase & Co., Blackstone Group and others spent more than HK$2 billion buying about 36 million Ping An H-shares in the first two weeks of this month, Great Wisdom reported on its microblog, without saying where it got the information.

Mainland developers rallied, with China Overseas Grand Oceans Group Ltd. soaring 6.4 percent to HK$5.95, capping its steepest two-day gain since February 2012. Agile Property rose 5.6 percent to HK$6.37. The nation’s banks will probably offer discounted mortgage rates in the second half of this year, according to a Bloomberg News survey conducted this month.

Huadian Power

Huadian Power slid 6.8 percent to HK$5.09 after saying it will raise HK$1.38 billion ($178 million) by placing 286.2 million new H-shares at HK$4.92 each. That’s a 9.9 percent discount to yesterday’s close.

About 330 companies on the Hang Seng Composite Index are scheduled to report earnings from this week through the end of August, according to data compiled by Bloomberg.

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