China Stocks in Hong Kong Rally on Stimulus Bets; Vanke Advances

  • Mainland expected to release trade, inflation data next week
  • Hong Kong gains narrow A share premium to near October low

Chinese stocks in Hong Kong rose to a three-month high as investors bet the nation’s central bank will add to stimulus and China Vanke Co. rallied after Evergrande Real Estate Group Ltd. bought a stake in the developer.

The Hang Seng China Enterprises Index gained 1.4 percent at the close, taking its advance this week to 1.9 percent. Vanke climbed to its highest level in two months after Evergrande paid $1.4 billion for a 4.7 percent stake. MGM China Holdings Ltd. advanced the most in a week after its earnings beat estimates. The Shanghai Composite Index slid 0.2 percent, while the ChiNext index of smaller companies dropped 1 percent.

Data due next week will probably show Chinese exports fell 3.5 percent in July, while inflation slowed to 1.8 percent, according to analyst estimates in Bloomberg surveys. Bets that central banks will take steps to bolster sluggish growth boosted stocks around the world, with the Bank of England unveiling a stimulus package on Thursday aimed at containing the fallout from Britain’s decision to leave the European Union.

"China will announce a series of macro data and people expect inflationary pressure won’t be high" and are speculating the central bank will take steps such as reducing banks’ reserve ratios, said Ronald Wan, chief executive of Partners Capital International Ltd. in Hong Kong.

The Hang Seng China Enterprises Index rose to 9,131.52, while the Shanghai Composite Index fell to 2,976.70. That divergence narrowed the premium on mainland shares to their Hong Kong counterparts to near a 10-month low. So-called H shares have outperformed those traded across the border over the past month as concerns about a crackdown on wealth-management products weighed on mainland equities. 

Vanke climbed 1.6 percent. Evergrande, controlled by billionaire Chairman Hui Ka Yan, bought the developer’s Shenzhen-traded shares through a unit, it said in a filing on Thursday. Evergrande cited Vanke’s "strong" financial performance as China’s largest developer as a reason for its investment.

MGM China gained 4.6 percent in Hong Kong after reporting a slowing pace of revenue decline in the second quarter. The casino operator posted HK$1.03 billion in earnings before interest, taxes, depreciation and amortization.

Dining Concepts Holdings Ltd. surged more than 850 percent as it debuted in Hong Kong. The restaurant operator, whose initial price was 45 Hong Kong cents, closed at HK$4.28.

Gains on the Shanghai Composite have been capped as it trades near the key 3,000 level, according to Castor Pang, head of research at Core-Pacific Yamaichi Hong Kong.

“We’ve experienced that when it rebounds to these levels, selling pressure is high," said Castor Pang, head of research at Core-Pacific Yamaichi Hong Kong. “If it breaks above 3,000, it will drive investors to come back again, but right now it’s close to the resistance level so most investors are cautious."

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