Hong Kong Stocks Head for Two-Week Gain on U.S. Optimism

Hong Kong stocks rose, with the city’s benchmark index capping a two-week advance, amid U.S. economic optimism ahead of Federal Reserve Chair Janet Yellen’s address to global central bankers today.

China Rongsheng Heavy Industries Group Holdings Ltd. surged 7.9 percent after agreeing to buy Kyrgyzstan oil assets. Bank of Communications Co., the Chinese lender part-owned by HSBC Holdings Plc, rose 1.4 percent after posting second-quarter profit that beat estimates. Li & Fung Ltd. fell 4.6 percent after the world’s largest supplier of clothes and toys to retailers said conditions in key markets remain challenging.

The Hang Seng Index climbed 0.5 percent to 25,112.23 at the. The measure advanced 0.6 percent this week, trading near a six-year high. The Hang Seng China Enterprises Index, also known as the H-share index, today jumped 1.1 percent to 11,058.69. Speculation the Fed is committed to supporting a strengthening economy sent the Standard & Poor’s 500 Index to an all-time high yesterday.

“Yellen is widely seen as pretty dovish and probably will take time to really consider when to raise interest rates,” Mark Konyn, chief executive officer of Cathay Conning Asset Management Ltd., which manages about $92 billion assets globally, said on Bloomberg TV. “That’s good news for markets.”

Investors are weighing whether the H-share index’s 20 percent rebound from a March low will continue after China data from factory activity to credit growth missed estimates, putting pressure on policy makers to boost stimulus. The gauge traded at 7.7 times estimated earnings at the close, compared with 11.6 for the Hang Seng Index and 16.7 on the Standard & Poor’s 500 Index yesterday.

Undemanding Valuations

“Valuations are still undemanding,” said Ben Kwong, a director at KGI Asia Ltd. in Hong Kong. “Investors are waiting for fresh buying catalyst following the recent rally.”

China Rongsheng jumped 7.9 percent to HK$1.50. The shipbuilder agreed to buy a 60 percent stake in an oilfield project in Kyrgyzstan for HK$2.18 billion ($281.3 million) in an all stock deal.

Bank of Communications added 1.4 percent to HK$5.76. Net income climbed 5.6 percent to 18.1 billion yuan ($2.9 billion) from a year earlier, the Shanghai-based lender said yesterday after the close. Analysts had expected a 18 billion-yuan gain, according to a Bloomberg survey. The bank also said it planned to be the nation’s first listed lender to offer stock incentives to management.

Comba Telecom Systems Holdings Ltd. jumped 12 percent to HK$3.06 after the maker of wireless network devices swung to a profit in the first half.

Order Delays

Among shares that fell, Li & Fung dropped 4.6 percent to HK$10, the biggest decline since Dec. 12. Customers are delaying order decisions until they get better indications about consumer confidence in the third quarter, the supplier to Wal-Mart Stores Inc. said yesterday when reporting earnings. First-half core operating profit declined 9 percent to $227 million on higher costs.

Futures on the S&P 500 added 0.1 percent after the underlying gauge yesterday closed at a record high. Yellen speaks today to global policy makers at a Fed symposium in Jackson Hole, Wyoming, as investors look for clues as to the timing of U.S. interest-rate increases.

Although U.S. data from housing to manufacturing showed signs of strength yesterday, tepid wage growth and slow inflation have given room to hold rates near zero. Consumer confidence in the world’s biggest economy unexpectedly fell to a nine-month low in August.

China may toughen its implementation of measures to stabilize its economy, according to a front-page commentary in the China Securities Journal, written by reporter Wang Donglin.

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