Hong Kong Stocks Climb; Banks Gain, Emperor Watch Advances

By Hanny Wan

July 21 (Bloomberg) -- Hong Kong's benchmark stock index jumped the most in four months, led by financial shares, after Citigroup Inc. posted a smaller loss than analysts estimated and oil had the largest weekly drop in more than three years.

HSBC Holdings Plc, Europe's biggest bank, climbed the most in four months. Industrial & Commercial Bank of China Ltd., the nation's biggest lender, advanced to a six-week high after the country's commercial banks lowered their average bad loan ratio.

China Petroleum & Chemical Corp., Asia's biggest oil refiner, surged to a one-month high on speculation lower crude oil costs will boost profit from making gasoline and diesel. Emperor Watch & Jewellery Ltd., a Hong Kong-based retailer, soared as much as 42 percent on its debut.

``We are seeing a short-term recovery in market sentiment as better newsflow comes out, helping to calm people down a bit,'' said Jacky Choi, a fund manager at Value Partners Ltd., which manages about $6 billion.

The Hang Seng Index added 724.15, or 3.3 percent, to 22,598.34 at 2:58 p.m. local time, its biggest surge since March 25. A gauge tracking financial shares accounted for 52 percent of the Hang Seng's advance today.

The Hang Seng China Enterprises Index, which tracks so- called H shares of Chinese companies, gained 3.6 percent to 12,564.49.

The Hang Seng Index has lost 19 percent this year after raw- material prices soared and the world's largest banks and securities firms reported more than $447 billion of writedowns and credit losses.

Bad-loan Ratio

HSBC rose 4.2 percent to HK$125, its largest jump since March 25. The bank has held talks with China Investment Corp. to attract investment from the Chinese sovereign fund, The Sunday Telegraph reported, without saying how it obtained the information.

ICBC climbed 3.1 percent to HK$5.72, headed for its highest close since June 6. China Construction Bank Corp., the nation's second-biggest, advanced 4 percent to HK$6.74.

Citigroup Inc., the biggest U.S. bank by assets, reported a second-quarter net loss of $2.5 billion on July 18, lower than the $3.67 billion loss predicted by analysts.

China's commercial banks have reduced their average bad-loan ratio to 6.1 percent as of June 30 as the industry enhances risk controls, the China Banking Regulatory Commission said yesterday. The bad-loan ratio at those banks was 6.3 percent at the end of March.

Oil Slumps

Sinopec, as China Petroleum is known, surged 4.9 percent to HK$7.86, set for its highest close since June 23. Sinopec may increase the annual capacity of its Maoming refinery by 48 percent to 20 million metric tons by 2012, said Cai Zhan, the plant's spokesman.

Cathay Pacific Airways Ltd., Hong Kong's largest airline, advanced 1.6 percent to HK$15.38, set for its highest close since June 23. 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 Airlines Corp., the country's third- largest airline, rose 6.9 percent to HK$2.49, its biggest jump since May 2.

Crude oil futures tumbled 11 percent last week, the most in more than three years. The contract was recently at $129.87 in after-hours trading. The price of jet fuel, a product of crude oil, dropped 4.8 percent last week.

Emperor Watch soared 13 percent to 48.5 Hong Kong cents, after surging as much as 42 percent. The company raised HK$547.5 million ($70 million) of net proceeds from an initial public offer by selling 1.35 billion shares at 43 Hong Kong cents each, the company said on July 16.

Properties Rise

Sun Hung Kai Properties Ltd., Hong Kong's No. 1 property developer by market value, climbed 6.9 percent to HK$119.50. Hang Lung Properties Ltd., a Hong Kong-based developer which also invests in mainland China, rose 4.4 percent to HK$26.30. Sino Land Co., a Hong Kong-based developer, added 5.5 percent to HK$15.46.

All but two stocks on the 43-member Hang Seng Index advanced. July futures climbed 2.9 percent to 22,607.

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

China Telecom Corp. (728 HK) advanced 14 cents, or 3.3 percent, to HK$4.40, its biggest jump since July 9. The nation's No. 1 fixed-line phone company added a record number of high- speed Internet users last month, helping the company counter a loss in telephone subscribers. China Telecom said it gained 890,000 broadband customers for a total of 40 million at the end of June.

Lee & Man Paper Manufacturing Ltd. (2314 HK) rose 19 cents, or 2 percent, to HK$9.87. Asia's second-largest containerboard maker forecast demand for paper products will rise as much as 8 percent this year, easing oversupply concerns.

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