Hong Kong Stocks Rally Most in Six Weeks as Developers Rebound

  • Mixed U.S. economic data damp outlook for Fed tightening
  • Casinos climb because Macau not seen as target of detentions

Hong Kong stocks climbed the most in six weeks, led by financial companies and casino operators, on speculation U.S. monetary policy will remain accommodative and as China’s broadest measure of new credit exceeded estimates in September.

The Hang Seng Index added 1.6 percent at the close, rising from a six-week low reached during trading on Monday. A gauge of real estate companies led gains, with China Overseas Land & Investment Ltd. climbing the most since June. Gambling firms advanced as concern that the detention of a casino company’s employees was part of a wider industry crackdown waned. The Shanghai B-share index rebounded 2.6 percent after plunging the most in nine months in the previous session.

Sentiment toward Hong Kong shares brightened Tuesday after weaker-than-expected U.S. manufacturing data boosted speculation that the world’s biggest economy will need low rates for longer, weighing on the dollar. With borrowing costs in the city tracking those in the U.S. through its currency peg, an increase in bets that the Federal Reserve will tighten policy by year-end had seen the Hang Seng Index decline this month after a 12 percent third-quarter surge.

"The rising dollar had led to outflow pressures from emerging markets, but last night the dollar softened," said Steven Leung, executive director at UOB Kay Hian (Hong Kong) Ltd. "In the short-term it won’t be that easy to reach 24,000 because the rising U.S. dollar is causing funds to leave," he said, also noting that flows into Hong Kong from the mainland have slowed.

The Hang Seng Index rose to 23,394.39. Valuations on the gauge climbed to a five-year high last month as mainland inflows into the city’s stocks swelled to a record. Net purchases via an exchange link with Shanghai has slowed to a trickle in the past week, helping drag the gauge lower. The index trades at 12.6 times reported earnings, compared with the MSCI All-Country World Index’s 21 multiple.

The Shanghai Composite Index rose 1.4 percent to its highest close since Sept. 8, led by industrial companies.

China’s aggregate financing was 1.72 trillion yuan ($255 billion) last month, compared with median estimate of 1.39 trillion yuan in a Bloomberg survey. Gross domestic product data due tomorrow is likely to show the economy expanded 6.7 percent in the three months through September, the third straight quarter at that pace, according to a separate survey.

Property Stocks

"China’s third-quarter growth will be announced tomorrow and the market is quite positive about it, expecting it will maintain 6.7 percent growth," said Linus Yip, a Hong Kong-based strategist at First Shanghai Securities Ltd.

The Hang Seng China Enterprises Index advanced 1.9 percent, its biggest jump since August. A gauge of property shares on the Hang Seng Index rose 2 percent, the biggest increase since Sept. 5. China Overseas Land climbed 4.9 percent, and China Resources Land Ltd. advanced 3.4 percent. Sino Land Co. and New World Development Co. gained more than 1.5 percent.

A measure of Macau’s gambling companies bounced back after sliding the most since August in the previous session as Chinese authorities detained employees from billionaire James Packer’s Crown Resorts Ltd. Wynn Macau Ltd. surged 4 percent, and MGM China Holdings Ltd. added 3.4 percent. Galaxy Entertainment Group Ltd. rose 2.7 percent.

Despite the market’s initial panic, the detentions were not directed at Macau and recent data including tourist arrivals have been good, helping casino shares recover on Tuesday, Leung said. The number of visitors to Macau from across the border rose 6.9 percent from a year earlier to 970,000 during the National Day holiday from Oct. 1 to 7.

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