Hong Kong’s Stocks Rally Most in Six Weeks as Developers Climb

  • PetroChina, China Shenhua lead advance for oil, coal shares
  • Bocom says fundamentals need to improve to sustain stock gains

Hong Kong’s stocks jumped the most in six weeks, as a surge in U.S. home sales increased speculation the world’s biggest economy can withstand higher interest rates.

The Hang Seng Index rose 2.7 percent at the close. PetroChina Co., the nation’s biggest energy producer, posted its steepest increase since mid-April as oil approached $50 a barrel. Billionaire Li Ka-shing’s Cheung Kong Property Holdings Ltd. climbed to a two-week high. The Shanghai Composite Index slipped 0.2 percent, dragged down by airlines.

Hong Kong stocks joined a global rally after U.S. equities climbed amid speculation the American economy can tolerate higher borrowing costs as odds increase the Federal Reserve will tighten policy this summer. Whether shares can sustain the rebound amid concerns about higher U.S. rates and slowing Chinese economic growth will depend on turnover, according to Partners Capital International in Hong Kong. Trading values fell to the lowest level this year on Monday.

Hong Kong stock gains were “driven by short covering after U.S. new home sales data greatly exceeded estimates,” said Hao Hong, chief China strategist at Bocom International Holdings Co. in Hong Kong. “The rebound driven by short covering is hardly a turnaround with a lack of improvement in fundamentals.”

The Hang Seng Index climbed for a second day to 20,368.05, while the Hang Seng China Enterprise Index of mainland shares trading in Hong Kong jumped 2.8 percent. The Shanghai Composite erased gains to close lower for a second day.

Energy companies rallied the most in Hong Kong, with China Shenhua Energy Co. gaining 6.1 percent after the Economic Information Daily reported China’s four biggest coal producers may consider a price increase in June. PetroChina advanced 3.9 percent. Cheung Kong and Henderson Land Development Co. both increased at least 3 percent.

The Hang Seng Index trades at 10.6 times projected 12-month earnings, about 20 percent cheaper than last year’s April high, after falling 7.2 percent in 2016 amid a surfeit of bad news. China’s slowdown is affecting everything from trade to retail sales, a dysfunctional political system is delaying bills and spurring calls for independence, while Goldman Sachs Group Inc. is predicting house prices will tumble 20 percent in a city where business is dominated by a handful of property tycoons.

“Overseas market rallies help boost sentiment in Hong Kong, where the valuation of H shares has been depressed,” said Ronald Wan, chief executive at Partners Capital in Hong Kong.

Carriers led declines in Shanghai as a rebound in fuel prices may hurt earnings. Juneyao Airlines Co. plunged 9 percent, while China Southern Airlines Co. lost 4.6 percent.

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