Hong Kong Stocks Rise on China Inflation; Developers Jump

Hong Kong stocks rose the first time in four days as inflation below China’s target offered room for more stimulus and developers jumped on prospects for further easing of property curbs. Shares rallied around the region amid optimism geopolitical tensions are receding.

China Resources Land Ltd., the second-biggest mainland developer listed in the city, surged 5.2 percent to lead gains on the Hang Seng Index. Tencent Holdings Ltd., Asia’s largest Internet company, gained 1.7 percent before reporting earnings this week. Orient Overseas International Ltd. climbed 5 percent after the freight transporter’s first-half profit beat estimates. China Shanshui Cement Group slid 3.8 percent after saying net income would drop at least 50 percent.

The Hang Seng Index gained 1.1 percent to 24,602.44 as of 10:21 a.m. in Hong Kong, with all but five shares rising on the 50 company gauge. The Hang Seng China Enterprises Index, also known as the H-share index, added 1.4 percent to 10,982.12.

“China’s data showed inflation is still under control so people are not worried about any hard landing and they’re generally optimistic,” said Francis Lun, Hong Kong-based chief executive officer at Geo Securities Ltd. “China can add more stimulus.”

The H-share gauge slid 2.2 percent through last week since entering a so-called bull market at the end of July, as investors took profits after the measure surged more than 20 percent from its March low. The gauge traded at 7.5 times estimated earnings at the last close, compared with 11.3 for the Hang Seng Index and 16.2 for the Standard & Poor’s 500 Index.

Inflation Data

China’s consumer price index rose 2.3 percent in July from a year earlier, the National Bureau of Statistics said over the weekend, below the 3.5 percent inflation target this year as the government seeks 7.5 percent economic growth. Factory-gate prices fell 0.9 percent, matching projections and extending the longest stretch of declines since 1999.

China loosened monetary conditions last quarter at the fastest pace in almost two years, a Bloomberg LP gauge showed. New yuan loans in July will be a record high for that month, according to a Bloomberg News survey of analysts before data due by Aug. 15, suggesting officials are keeping the credit spigot open even as debt risks mount.

First-tier city Shenzhen plans to make small adjustments to property policies and scrap limits on home prices, China Times reported, citing an unidentified person familiar with the matter. The government has prepared policies to ease controls on property market, including lower mortgage down payments for second home buyers.

U.S. Shares

Futures on the S&P 500 added 0.2 percent today. The U.S. benchmark index climbed 1.2 percent on Aug. 8, the most in five months, after Russia said warplanes ended drills near Ukraine.

Ukraine’s military has demanded pro-Russia rebels in the former Soviet republic’s east surrender, dismissing the insurgents’ offer of a cease-fire. A rebel leader broached the possibility of a truce during the weekend, saying in a statement that militants will continue to fight should Ukraine not end its offensive. Russian Foreign Minister Sergei Lavrov said a cease-fire is “urgently needed,” saying the region faced a humanitarian catastrophe.

Investors won’t be able to sell Shanghai shares through an exchange link with Hong Kong unless they transfer the stock to a broker before trading starts that day, Hong Kong Exchanges & Clearing Ltd. said yesterday. This will allow the trades to be settled in compliance with mainland rules, Hong Kong bourse Chief Executive Officer Charles Li said yesterday. Cross-border trading is expected.

Hong Kong Financial Secretary John Tsang said on his weekly blog the city is at risk of external uncertainties, economic growth slowdown and outflows triggered by political uncertainty. Outflows in short period of time would shake local interest rates, stock and property markets, it said.

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