Hong Kong Stocks Cap Three-Week High on China New Credit Growth

Feb 17, 2014 3:30 am ET

Feb. 17 (Bloomberg) -- Hong Kong stocks rose a second day, with the city’s benchmark equity gauge capping a three-week high, after new credit in China climbed to a record in January.

China Life Insurance Co., the nation’s biggest company in the sector, jumped 5.8 percent as UBS AG and Credit Suisse Group AG raised their ratings on the stock. Tencent Holdings Ltd., Asia’s largest Internet company by market value, advanced 5.7 percent to extend a record high after Sina.com reported it may invest in a restaurant and entertainment guide website. Casino operators slid, with Sands China Ltd., a unit of billionaire Sheldon Adelson’s Las Vegas gaming company, dropping 3.4 percent.

The Hang Seng Index gained 1.1 percent to 22,535.94 in Hong Kong, its highest close since Jan. 23. About twice as many stocks rose as fell on the 50-member gauge, with volume 39 percent lower than the 30-day average. The Hang Seng China Enterprises Index, also known as the H-share index, added 1.7 percent to 10,101.21.

“Credit growth is temporarily helping the Chinese economy,” said Francis Lun, chief executive officer of Geo Securities Ltd. “There’s renewed fund flow into Hong Kong. Investor sentiment is quite good but it’s not euphoria.”

Hong Kong’s benchmark index entered a so-called correction this month, sliding at least 10 percent from its recent peak in December. The index has pared losses to 3.3 percent this year, while the H-share gauge dropped 6.6 percent as manufacturing data signaled a slowdown in the world’s second-largest economy.

China Lending

Chinese aggregate financing, the broadest measure of credit in the country, was 2.58 trillion yuan ($425 billion) last month, the People’s Bank of China said in a Feb. 15 statement. That exceeded the 1.9 trillion yuan median estimate in a Bloomberg News survey and the previous high of 2.54 trillion yuan in January 2013.

The data, while suggesting China can limit the scale of a slowdown, contrast with a central bank call last month for lenders to control surging loans and highlight diminishing economic returns from credit growth.

Insurers Advance

Insurers led gains on the Hang Seng Index. China Life jumped 5.8 percent to HK$22.85 after UBS raised the stock to buy from neutral, while Credit Suisse rated it outperform from neutral. Ping An Insurance (Group) Co., China’s second-largest company in the sector, advanced 3.8 percent to HK$66.55 after life insurance premium income rose to 37.2 billion yuan in January from 25.7 billion yuan a year earlier.

Futures on the Standard & Poor’s 500 Index rose 0.1 percent today after the gauge gained 0.5 percent on Feb. 14 amid better- than-forecast earnings and consumer confidence in was stronger than projected in February. The U.S. market is closed today for a holiday.

Technology companies led gains on the Hang Seng Composite Index. Online-game developer NetDragon Websoft Inc. jumped 11 percent to HK$16.94. Kingsoft Corp. surged 6.6 percent to HK$25.90 after the software maker said it will sell 40 million shares of gaming unit Westhouse Holdings Ltd. to Xiaomi Corp for $20 million.

Tencent Investment

Tencent increased 5.7 percent to HK$580. The company may invest as much as $500 million in website Dianping.com, Sina.com reported, without saying where it got the information. Tencent will make an announcement on Feb. 19, the report said.

Citic 21CN Co. jumped 25 percent to HK$4.12, its highest close since March 2000. The drug-authentication service provider surged more than seven-fold this year after Alibaba Group Holding Ltd. agreed to buy a majority stake. Citic said it’s unaware of the reason for today’s surge.

Casino companies led declines. Sands China dropped 3.4 percent to HK$57.50. Galaxy Entertainment Group Ltd., controlled by billionaire Lui Che-woo, slid 3.2 percent to HK$71.90.

“There aren’t many near-term catalyst that can drive another round of upgrades for gaming stocks,” said Victor Yip, an analyst at UOB-Kay Hian Holdings Ltd. “A lot of fund managers are considering that now is not a good time to put additional capital in the sector.”

--Editor: Jim Powell