China Stocks Rise After Factory Data; Casinos Fall in Hong Kong

  • Official, private manufacturing gauges signal stability
  • Wharf leads developer gauge higher as Citi upgrades stock

China’s stocks got off to a brighter start in 2017 as manufacturing data signaled that the world’s second-largest economy is stabilizing.

The Shanghai Composite Index rose 1 percent, the most in almost two weeks, to close at 3,135.92. The gauge tumbled 12 percent in 2016, its biggest loss in five years, as a weakening currency and tighter liquidity cut demand for Chinese assets. TCL Corp. and Midea Group Co. led a consumer share rally, climbing more than 3 percent each on Tuesday. The Hang Seng Index added 0.7 percent as property shares led gains, while casinos retreated. Trading turnover in Hong Kong totaled HK$49.3 billion ($6.4 billion), the lowest since Dec. 21.

China’s factories and services closed out 2016 on relatively robust notes that signal growth is strong enough for policy makers to keep pushing for economic reforms this year. The official manufacturing purchasing managers index stabilized near a post-2012 high in December, edging down to 51.4 from 51.7 the prior month. Caixin’s December China Manufacturing PMI released Tuesday climbed to 51.9, above the most optimistic estimate in a Bloomberg survey.

"Chinese stocks had a really bad year," said Linus Yip, a strategist at First Shanghai Securities in Hong Kong. "The PMI figures reassure investors that China’s economy is stabilizing."

Macau casino operators slumped on concern China is stepping up curbs on capital outflows, with the nation’s currency regulator now requiring citizens to pledge that foreign exchange obtained through an annual conversion quota won’t be used to buy overseas property, securities, life insurance or investment-type insurance. While such rules aren’t new, citizens previously didn’t have to sign such a pledge. In December, Macau said it had introduced a limit on UnionPay card transactions.

“Tightening controls in foreign-exchange purchases are fueling concern that China may roll out further restrictions for using UnionPay cards overseas,” said Sonija Li, an analyst at Kim Eng Securities in Hong Kong. "That is negative for casino operators."

Analysts also said there has been a lack of upside surprises for casino operators in December, as gross gaming revenue rose 8 percent, slightly missing the median analyst estimate of 9 percent. A gauge of Macau casinos tracked by Bloomberg Intelligence fell 1.8 percent, the most since Dec. 15. MGM China Holdings Ltd. dropped 6 percent, while Galaxy Entertainment Group Ltd. lost 1.3 percent.

A measure of property developers jumped 2 percent, the most since October. Wharf Holdings Ltd. led gains with a 4.4 percent advance after Citi upgraded the stock to buy from sell, citing an expected recovery in Hong Kong retail sales. Cheung Kong Property Holdings Ltd. rose 1.5 percent. China Evergrande Group added 2.5 percent after the developer locked in eight strategic investors to fund a planned backdoor listing in mainland China.

The Hang Seng China Enterprises Index added 0.7 percent, after falling 2.8 percent in 2016.

* Midea rose 3.4% in Shenzhen after the U.S. government cleared the company’s planned purchase of Kuka; TCL climbed 3.9%

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