Hong Kong Stocks Advance From Three-Month Low; Developers Plunge

  • Sands China leads casino rally; HSBC gains after earnings
  • City’s property curbs to have long-term negative impact: Bocom

Market Outlook: Is Volatility Here to Stay?

Hong Kong’s benchmark stock index rose from a three-month low as the FBI said Hillary Clinton’s handling of her e-mails wasn’t a crime, boosting her chances on the eve of the U.S. elections. Property developers tumbled as the government boosted measures to curb surging home prices.

The Hang Seng Index closed 0.7 percent higher. The gauge fell for eight of the past nine days as mainland inflows slowed and investor angst grew ahead of the U.S. election. Sands China Ltd. led a rally for casino companies, while HSBC Holdings Plc added 3 percent after announcing earnings that beat estimates. Sun Hung Kai Properties Ltd. and Cheung Kong Property Holdings Ltd. slumped at least 8 percent after the government raised a stamp duty on home purchases.

Property transactions will fall as much as 70 percent in the next three months after the unexpected move, according to Centaline Property Agency Ltd. In another development that could affect markets, China’s top legislative body ruled that Hong Kong people who advocate independence can’t hold public office. In the U.S., the Federal Bureau of Investigation is sticking to its conclusion that Clinton’s handling of her e-mails as secretary of state wasn’t a crime, boosting the Democrat before this week’s elections.

"Hillary’s improving prospects will provide a short-term boost to Hong Kong stocks," said Hao Hong, chief strategist at Bocom International Holdings Co. in Hong Kong. "Traders will need to cover short positions which they built last week betting against Hillary. In the longer term, the stamp duty increase and the NPC interpretation of Hong Kong law will have negative impact outweighing any sentiment rebound triggered by U.S. election news. The stamp duty is a big game changer for Hong Kong’s property market."

The Hang Seng Index’s 14-day relative-strength index dropped to 38 on Friday, the lowest since May, while turnover on the city’s exchange slid to a four-week low. The Hang Seng China Enterprises Index climbed 1.2 percent to a one-week high, while the Shanghai Composite Index added 0.3 percent. Hong Kong’s currency is pegged to the U.S. dollar, ensuring its monetary policy moves in lock-step with the Federal Reserve’s.

Sun Hung Kai led a 5 percent slide in the gauge of developers, dropping 9.9 percent, the most since March 2012. New World Development Co. lost 9 percent, while Cheung Kong Property fell 8.8 percent.

In a televised conference including the city’s top-ranking officials, the government announced plans Friday to raise the stamp duty to 15 percent for all residential purchases -- except for first-time buyers who are permanent residents. Until now, the highest levy for residents was 8.5 percent, while foreigners already paid a 15 percent stamp duty. Hong Kong is the world’s costliest home market, according to Demographia.

“The magnitude of the stamp duty increase is a little surprising," said Alan Jin, an analyst at Mizuho Securities Asia Ltd., estimating that transaction volumes will fall by 30 percent.

CICC, Coolpad

China International Capital Corp., the bank that has brought some of the country’s biggest state-owned firms to market, fell 2.1 percent after agreeing to buy China Investment Securities Co. to gain a foothold in the retail-brokerage business.

Coolpad Group Ltd. fell as much as 25 percent to the lowest level since February 2013 after a report of cash strains at a client. Leshi Internet Information & Technology Corp Beijing’s smartphone segment is in arrears with payments to suppliers and aims to raise funds, according to a report.

The Hang Seng Index has fallen 2.1 percent this quarter as net purchases of the city’s stocks through an exchange link with Shanghai dwindled. Record mainland inflows helped the gauge surge 12 percent in the previous three months, the most in seven years.

HSBC reported Monday that its third-quarter adjusted pretax profit -- which excludes one-time items -- was $5.59 billion. That compares with the $5.29 billion average estimate of five analysts compiled by Bloomberg News.

China’s top legislature approved interpretation of Article 104 of Hong Kong Basic Law, which deals with oaths of allegiance for public officials, Xinhua News Agency reported in a flash headline early Monday. China has named Xiao Jie as the new finance minister, Xinhua reported, replacing veteran finance official Lou Jiwei. The NPC’s Standing Committee announced the change in a one-line statement, without giving further details.

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