Hong Kong Stocks Advance, Reversing Drop; Cnooc, Galaxy Climb

By Hanny Wan

July 22 (Bloomberg) -- Hong Kong stocks rose, reversing declines. Cnooc Ltd., China's biggest offshore oil producer, led the advance after crude oil prices climbed yesterday for the first time in five days.

Oil producers' ``earnings have the potential to surprise on the upside,'' said Mona Chung, a Hong Kong-based fund manager at Daiwa Asset Management Ltd., which oversees more than $2 billion.

Semiconductor Manufacturing International Corp., China's biggest chipmaker, surged the most in more than two months on a report saying it may sell a stake for 2 billion yuan ($293 million). Galaxy Entertainment Group Ltd. and Melco International Development Ltd., operators and investors in casinos in Macau, gained for a second day after the number of visitors to the gambling enclave rose.

The Hang Seng Index added 14.16, or 0.1 percent, to 22,547.06 at 3:17 p.m. local time, after dropping as much as 0.6 percent in the morning session. The Hang Seng China Enterprises Index, which tracks so-called H shares of Chinese companies, climbed 0.4 percent to 12,504.02.

Shares fell earlier, led by airlines and refiners, on concern higher fuel costs will erode earnings.

Cnooc added 1.8 percent to HK$12.18, its sharpest gain since July 2. The stock was the Hang Seng Index's biggest percentage gainer today.

Cathay Pacific Airways Ltd., Hong Kong's biggest airline, fell 2.6 percent to HK$14.80, its largest decline since July 15. The company said on July 2 that its earnings this year will be ``disappointing'' as the price of fuel trades near a record high.

China Eastern

China Eastern Airlines Corp., the country's No. 3 airline, lost 4 percent to HK$2.38. China Petroleum & Chemical Corp., Asia's largest refiner, known as Sinopec, retreated 0.7 percent to HK$7.69, its steepest drop since July 15.

Crude oil futures added 1.7 percent to $131.04 a barrel in New York yesterday, the first increase in five sessions. The contract was recently at $131 in after-hours trading.

Semiconductor Manufacturing soared 9.8 percent to 45 Hong Kong cents, its largest jump since May 5. The stock was the biggest percentage gainer on the 201-member Hang Seng Composite Index. The company may sell a stake of about 20 percent to Datang Telecom Technology & Industry Group, China Business News reported, citing an unidentified person familiar with the situation.

Galaxy Entertainment climbed 7.3 percent to HK$3.23, its biggest jump since April 23. The stock rose 0.7 percent yesterday. Melco rose 5.5 percent to HK$5.37, adding to an 8.8 percent jump yesterday. Before that, the stock had slumped 38 percent this month after Macau announced tighter visiting rules. The shares were the second- and third-largest gainers on the Hang Seng Composite Index today.

More Visitors

The number of visitors to Macau rose 22 percent to 2.34 million in June, according to numbers released yesterday by the Macau Statistics and Census Service.

``The growth is still there,'' said Gabriel Chan, a Hong Kong-based analyst at Credit Suisse Group. Chan rates Melco shares ``outperform,'' while Galaxy Entertainment has an ``underperform'' recommendation, according to Bloomberg data.

Twenty-two stocks on the 43-member Hang Seng Index advanced and 19 dropped. July futures slipped 0.1 percent to 22,579.

The following shares rose or fell. Stock symbols are in brackets after company names.

Lenovo Group Ltd. (992 HK), China's biggest maker of personal computers, lost 5.2 percent to HK$5.29, its biggest drop since July 8. International Business Machines Corp., the world's largest computer-services provider, offered nearly 116.2 million Lenovo shares, or a 1.3 percent stake, at HK$5.19 to HK$5.36 each, according to an e-mail to investors yesterday. That's the third time IBM offered to sell a stake in Lenovo this year.

JPMorgan Chase & Co. cut its recommendation on Lenovo to ``neutral'' from ``outperform.''

Sino Gold Mining Ltd. (1862 HK) surged HK$5.95, or 15 percent, to HK$46.95, its biggest advance since Jan. 23. The owner of China's second-largest bullion mine more than tripled output at its Jinfeng project to take advantage of higher prices. Production rose to 35,412 ounces in the three months ended June 30, the company said.

To contact the reporter on this story: Hanny Wan in Hong Kong at hwan3@bloomberg.net