Hong Kong Stock Benchmark Enters Bull Market, Erasing 2016 Loss

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  • Property developers lead gains on optimism rates will stay low
  • Regional equities rally after S&P 500 rises to record

Hong Kong’s benchmark stock index erased losses for the year to enter a bull market amid a broad advance for regional equities. Property developers led gains.

The Hang Seng Index added 0.5 percent at the close, taking its increase from a three-year low in February to 20 percent. Cheung Kong Property Holdings Ltd. climbed amid expectations interest rates will stay low. New World Development Co. rose for a ninth straight day, its longest winning run in seven years, after Credit Suisse Group AG raised the stock’s rating. The Shanghai Composite Index advanced for the first time in four days.

Real estate companies in Hong Kong, where borrowing costs tend to move in tandem with the U.S., have boosted the equity rally as positive earnings surprises helped push the S&P 500 Index to a record high Wednesday. Japanese stocks climbed as Kyodo News reported that the government was considering a stimulus program.

“Hong Kong shares’ valuation is quite attractive and investors are taking advantage of that and the good momentum in U.S. stocks,” said Wang Zheng, Shanghai-based chief investment officer at Jingxi Investment Management Co., which oversees about $300 million. “Given the fundamentals on U.S. equities are solid, the run-up on Hong Kong stocks will probably carry on.”

The Hang Seng Index climbed to 22,000.49 in Hong Kong, taking its gain for 2016 to 0.4 percent. The gauge is valued at 11.5 times its projected 12-month earnings, 12 percent cheaper than the Shanghai Composite, according to data compiled by Bloomberg. The Hang Seng China Enterprises Index of mainland companies listed in the city and the Shanghai gauge increased 0.4 percent each.

The MSCI Asia Pacific Index added 0.4 percent, led by Japanese equities after Kyodo News reported the government is considering a 20 trillion yen ($187 billion) stimulus program.

Developers Advance

New World Development gained 1.7 percent, capping a nine-day, 13 percent gain, after Credit Suisse lifted its rating to outperform from neutral. The stock has rallied 47 percent since Feb. 12, the most among the Hang Seng Index’s 50 constituents. Cheung Kong advanced 2.2 percent and Sun Hung Kai Properties Ltd. climbed 0.6 percent on Thursday.

In mainland trading, liquor makers and appliance manufacturers gained, with Kweichow Moutai Co. rising the most in a week, while Jiangsu Yanghe Brewery Joint-Stock Co. added 0.9 percent. Midea Group Co. advanced 2.8 percent after the Chinese company said it has an almost 86 percent stake in German robot maker Kuka AG following a tender offer.

Chinese railroad stocks advanced after the nation’s planning body unveiled a proposal to expand the network over the next 10 years. China Railway Group Ltd. increased 0.4 percent and Gem-Year Industrial Co., which makes carriage bolts, jumped 2.4 percent.

“The government wants to use infrastructure investment, such as in railways, to counter a decline in economic growth,” said Jingxi’s Wang.

Margin traders increased holdings of mainland shares purchased with borrowed money to a three-month high. The outstanding balance of margin debt on the Shanghai and Shenzhen exchanges rose to 882.1 billion yuan ($132.2 billion) on Wednesday to the highest level since April 19.