Hong Kong Shares Climb Most in Two Months as Developers Advance

  • Receding odds of Fed action helping property stocks: analyst
  • Hong Kong home sales rise to highest level in 14 months

Hong Kong’s benchmark equity index climbed the most in almost two months, with speculation that the Federal Reserve may rethink any immediate plans to raise borrowing costs adding to optimism spurred by increasing property sales.

The Hang Seng Index added 1.7 percent, the most since July 12. A gauge of property stocks advanced to a one-year high, with Sun Hung Kai Properties Ltd. and Sino Land Co. leading with gains of more than 3 percent each. The Shanghai Composite Index climbed for a second day, while a measure of small-company shares advanced in Shenzhen.

Hong Kong’s real estate market is especially sensitive to Fed monetary policy, with a currency peg to the greenback ensuring the city’s interest rates follow that of the U.S. The odds that the American central bank will increase borrowing costs this month decreased after non-farm payrolls data released Friday missed estimates for August. At least one residential project in Hong Kong was sold out over the weekend, while data Friday showed home sales rose to the highest level in at least 14 months in August.

“Hong Kong property sales are still pretty good and, with a lower interest-rate-hike possibility in the U.S., property stocks may continue their strength from August,” said Linus Yip, a Hong Kong-based strategist with First Shanghai Securities. “It’s a critical moment because the Hang Seng Index shot up to new highs and has outperformed global markets in August.”

Yip added that the city’s legislative council election may lend some support to the market by removing uncertainties and helping sentiment. Hong Kong candidates seeking a vote to decide the future of Chinese rule won seats in the city’s legislature amid record turnout Sunday.

The Hang Seng Index rose to 23,649.55. The Hang Seng China Enterprises Index climbed 1.5 percent, while the Shanghai Composite closed 0.2 percent higher. The ChiNext index of small-company shares advanced 0.6 percent.

The 14-day relative strength measure for the Hang Seng Index, measuring how rapidly prices have advanced or dropped during a specified time period, was at 75.3 on Monday. Readings above 70 indicate a possible reversal. Sun Hung Kai Properties rose 4.7 percent and Sino Land added 3.6 percent. Tencent Holdings Ltd. rose 4.2 percent to a record, reaching a market value of HK$1.99 trillion ($256.5 billion).

Insurers Advance

China Pacific Insurance Group Co. rose 2.7 percent and PICC Property & Casualty Co. added 2.8 percent to lead insurers higher in Hong Kong. American International Group Inc. is looking to raise about $190 million by selling its remaining shares in PICC, according to a media report.

Chinese insurance stocks may continue to rise as first-half operating trends of both life and property-and-casualty businesses were stronger than projected, and earnings are expected to improve, Darwin Lam and Michelle Ma, analysts at Citigroup Inc., wrote in a report last week.

China is scheduled to release a set of August economic data this week, with foreign trade due on Thursday and inflation the following day. An official factory gauge published last week showed manufacturing unexpectedly rose to the highest level in almost two years in August.

— With assistance by Shidong Zhang, and Kana Nishizawa

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