Chinese Shares in Hong Kong Rise Most in Week on Economy

Chinese stocks trading in Hong Kong climbed the most in a week amid speculation the central government is accelerating measures to support economic growth.

China Citic Bank Corp. and China Minsheng Banking Corp. led gains for financial shares, climbing more than 1 percent. The People’s Bank of China is said to plan the injection of about 200 billion yuan ($32.7 billion) into some national and regional lenders. Bank of America Corp. said the move is equal to a 20 basis-point cut in reserve-requirement ratios. The liquidity injection came before today’s start of a Communist Party meeting and tomorrow’s gross domestic product data. PetroChina Co., the nation’s biggest oil company, advanced for a second day.

The Hang Seng China Enterprises Index rose 0.6 percent to 10,295.52 at the close, the most since Oct. 9. The Shanghai Composite Index added 0.7 percent to 2,356.73. The mainland gauge slid 1.4 percent last week amid speculation a trading link between Hong Kong and Shanghai will be delayed.

“The government is releasing more liquidity into the market and the market certainly welcomes the news,” said Wang Weijun, a strategist at Zheshang Securities Co. in Shanghai. “However, the market still remains cautious as the economic data coming out tomorrow might not be very optimistic.”

The CSI 300 Index advanced 0.5 percent. Hong Kong’s Hang Seng Index gained 0.2 percent. The Bloomberg China-US Equity Index, the measure of the most-traded U.S.-listed Chinese companies, added 1.2 percent in New York on Oct. 17.

Liquidity Injection

The People’s Bank of China is providing funds to joint-stock banks to help them prepare for year-end liquidity needs, a government official familiar with the matter said on Oct. 17, asking not to be identified because there hasn’t been an official announcement. Joint-stock banks are mid-sized national banks with mixed ownership.

The liquidity injection “is in line with our views that the Chinese government is to introduce a series of easing measures in coming weeks to support the launch of the Shanghai-Hong Kong Stock Connect and the ruling party’s 4th Plenum,” Lu Ting, China economist at Bank of America, wrote in a report. “Other than helping the real economy post the release of poor August macro data, the major purpose of this 200 billion yuan injection is to boost confidence in the financial markets, especially the A shares listed in Shanghai.”

GDP Data

Citic Bank gained 1.3 percent in Hong Kong, while Minsheng Banking advanced 1.6 percent. China Merchants Bank Co. climbed 0.5 percent.

The National Bureau of Statistics is due to announce data on third-quarter economic growth and September industrial production, retail sales and fixed-asset investment tomorrow.

Economic expansion may have slowed to 7.2 percent from 7.5 percent in the second quarter, according to the median estimate of a Bloomberg survey. Industrial output growth probably accelerated to 7.5 percent in September from 6.9 percent a month earlier, a Bloomberg survey showed.

A measure tracking mainland-traded health-care companies rose 1.1 percent today, the second most among the CSI 300’s 10 industry groups. Shijiangzhuang Yiling Pharmaceutical jumped 5.1 percent while Zhejiang Medicine Co. rose 2.7 percent.

The spread of the Ebola virus globally has raised the market’s attention to pharmaceutical stocks, Wu Kan, a fund manager at Shanghai-based Dragon Life Insurance Co., which oversees about $3.3 billion, said last week. China and the U.S. have agreed to boost cooperation on fighting the Ebola epidemic, the official Xinhua News Agency reported over the weekend.

Party Plenum

The Shanghai Composite is valued at 8.5 times 12-month projected earnings, compared with 6.5 times for the Hang Seng China index, according to data compiled by Bloomberg. Trading volumes in the Shanghai index were 21 percent below the three-month average today.

The Communist Party starts its plenary session today in Beijing as analysts predicted the meeting may produce legal, land, tax and market reforms.

“For the ruling party, the first concern is the state and society is stable and controllable, then it will start to consider how to improve the ways to control it,” said Professor Ji Weidong, Dean of KoGuan Law School at Shanghai Jiao Tong University. It “can clarify power boundaries while maintaining the existing power structure,” he said.

In Hong Kong, protest leaders and government officials pledged to move ahead with talks aimed at ending more than three weeks of pro-democracy demonstrations, even after a weekend of violent clashes that injured dozens.

Talks between the two sides are set to begin tomorrow afternoon and will go ahead amid rising tensions in the streets. The clashes this weekend were concentrated in Mong Kok, one of the three sites occupied by demonstrators, after police cleared protesters from a key intersection on Oct. 17, prompting thousands to pour back into the neighborhood to take back the streets.

— With assistance by Shidong Zhang

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