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Hong Kong Stocks Rise to Three-Week High on China Stimulus Bets
Hong Kong stocks rose, with the Hang Seng Index closing at a three-week high, after Chinese banks gained on speculation policy makers will lower lending curbs to boost growth in the world’s second-largest economy. China Construction Bank Corp., the nation’s second-largest lender, gained 1.7 percent. China Life Insurance Co., the country’s largest insurer, climbed 3.9 percent on a speculation premiums will grow this quarter. Esprit Holdings Ltd., a clothier that gets about 80 percent of sales in Europe, retreated 1.2 percent as bad loans held by Spanish banks surged, raising concern about the region’s debt crisis.
The Hang Seng Index advanced 1 percent to 20,995.01 at the close, with almost five shares rising for each that fell. Volume on the measure was 34 percent lower than the 30-day intraday average, according to data compiled by Bloomberg. The Hang Seng China Enterprises Index of mainland companies advanced 1.4 percent to 11,047.43, the highest close since March 16. “China will probably look at other levers to stimulate consumption rather than flood the banks with more money,” said Andrew Sullivan, principal sales trader at Piper Jaffray Asia Securities Ltd. “I don’t think cutting the reserve ratio will do an awful lot.”
Shares of Chinese lenders rose yesterday after Xinhua News Agency said the reserve ratio requirements for banks in the mainland may be cut to help stimulate the economy. The nation may also increase open market operations including reverse repurchase agreements and redemption of central bank bills, the report said. China Construction Bank increased 1.7 percent to HK$6.08. Industrial & Commercial Bank of China Ltd., the world’s biggest lender, added 1.2 percent to HK$5.26. Agricultural Bank of China Ltd. rose 1.1 percent to HK$3.58.
Mainland insurers rallied on prospects for higher revenue. “Premiums will pick up from the second quarter because of a lower base a year earlier, when the government tightened practices of selling policies through banks, hurting premiums,” said Xie Jiyong, an analyst at Capital Securities Corp. in Shanghai. Shares also rose after the Oriental Morning Post reported the China Insurance Regulatory Commission may soon announce new rules to allow domestic insurers access to new products and more regions. The newspaper did not identify its source for the report. China Life climbed 3.9 percent to HKD21.20. Ping An Insurance Group Co. advanced 3 percent to HKD64.15.
The Hang Seng Index climbed to a two-week high yesterday as the International Monetary Fund raised global economic forecasts. The gauge has rallied about 14 percent this year, lifting the value of shares on the measure to 10.6 times estimated earnings. That compares with 13 times for the Standard & Poor’s 500 Index and 10.7 times for the Stoxx Europe 600 Index.
Futures on the S&P 500 rose 0.5 percent yesterday. The gauge dropped 0.4 percent in New York yesterday as Intel Corp. and International Business Machines Corp. reported the slowest sales growth since 2009. Wynn Macau Ltd. climbed 1.7 percent to HKD23.65. Parent Wynn Resorts Ltd. rallied on Wednesday after Macaubusiness.com said the owner of the Wynn and Encore casinos may this month sign a land contract for a proposed resort in Cotai.
Among stocks that fell, companies that do business in Europe dropped as surging bad loans at Spanish banks suggested a cleanup of the nation’s lenders may cost more than anticipated. Spain and France plan to raise as much as 13.5 billion euros (USD17.6 billion) in debt auctions today. Esprit slid 1.2 percent to HKD16.58. Cosco Pacific Ltd., which operates a port in Greece, fell 0.4 percent to HKD11.12.
Hang Seng Index futures expiring this month gained 1.2 percent to 21,019. The HSI Volatility Index slipped 5.2 percent to 19.18, indicating options traders expect a swing of about 5.5 percent in the benchmark index over the next 30 days.
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