Hong Kong Stocks Rise 4th Day on Signs of China Stimulus - Businessweek

Hong Kong stocks gained, with the Hang Seng Index (HSI) extending its advance for a fourth day to its longest rising streak since March, on signs China is boosting infrastructure investment as it seeks to spur growth in the world’s second-largest economy.

China Railway Group Ltd. (390), the country’s biggest builder of train lines, gained 1.8 percent after China boosted investment in railways for a second time in a month. Aluminum Corp. of China Ltd., the nation’s largest producer of the metal, gained 1.6 percent. Hang Lung Properties Ltd., a Hong Kong developer that derives 46 percent of its sales from the mainland, gained 3.4 percent ahead of reporting half-year results.

The Hang Seng Index rose 0.8 percent to 19,747.34 as of 11:16 a.m. Hong Kong time, with almost seven shares gaining for each that fell on the 49-member gauge. The Hang Seng China Enterprises Index (HSCEI) of mainland companies added 1.1 percent to 9,624.76.

“The question is when investors get bullish,” said Khiem Do, Hong Kong-based head of Asian multi-asset strategy at Baring Asset Management (Asia) Ltd., which oversees about $8 billion. “They are looking for a strong reason to buy back into the market. There is encouraging progress being made.”

The benchmark Hang Seng Index fell 9.7 percent from this year’s high in February through yesterday on signs Europe’s debt crisis is worsening while growth slows in China and the U.S. The drop reduced the value of shares on the gauge to 10.4 times estimated earnings on average, compared with 13.5 for the Standard & Poor’s 500 Index and 11.2 for the Stoxx Europe 600 Index.

Rail Spending

Equities rose after leaders in Berlin, Paris and Rome backed European Central Bank President Mario Draghi by saying they will do what’s needed to protect the euro and as China was seen boosting its infrastructure stimulus measures.

China’s Ministry of Railways, the nation’s largest corporate debt issuer, said it planned to spend 470 billion yuan ($74 billion) on railroads and bridges this year. Chinese cities may spend at least 1 trillion yuan building subways from 2010 through 2015, China Daily reported, citing Chen Xunru, a member of the Chinese People’s Political Consultative Conference.

China Railway Group gained 1.8 percent to HK$3.39. China Railway Construction Corp., builder of more than half of the mainland’s modern rail system, gained 1.5 percent to HK$6.80. CSR Corp., a Chinese train maker, gained 2.6 percent to HK$5.62.

China Aluminum Corp (2600), also known as Chalco, rose 1.6 percent to HK$3.19. Glencore International Plc, the world’s largest commodities trader, gained 1.3 percent to HK$38.65. Zijin Mining Group Co., China’s biggest gold producer, rose 1.6 percent to HK$2.48.

Developers Rise

Hang Lung Properties, which is due to report half-year earnings today, rose 3.4 percent to HK$27.50. It led gains among Hong Kong developers amid signs that real-estate companies are selling property at the fastest pace in at least seven years to raise cash ahead of an increase in government land sales. Sino Land Co., controlled by billionaire Robert Ng, gained 1.7 percent to HK$13.30.

Futures on the Hang Seng Index advanced 1.2 percent to 19,731. The HSI Volatility Index (VHSI) lost 2.4 percent to 20.45, indicating traders expect a swing of about 5.9 percent in the benchmark index during the next 30 days.

To contact the reporter on this story: Patrick Boehler in Hong Kong at pboehler@bloomberg.net

To contact the editor responsible for this story: Nick Gentle at ngentle2@bloomberg.net