Hong Kong's Stocks Advance; Sinopec, Li & Fung Climb

By Hanny Wan

Aug. 7 (Bloomberg) -- Hong Kong stocks rose for the first time in three days after a retreat in crude oil prices eased concern higher energy costs will hurt consumption and earnings.

Li & Fung Ltd., which sells goods to Wal-Mart Stores Inc., climbed the most in a week. China Petroleum & Chemical Corp., the nation's biggest refiner, advanced the most this week after crude oil prices fell to a three-month low. The city's stock market was closed yesterday because of a typhoon on a day when the MSCI Asia Pacific Index rallied 1.5 percent.

Cathay Pacific Airways Ltd. retreated the most in a month after reporting its first loss in five years, prompting Goldman, Sachs & Co. and UBS AG to cut their share-price estimates.

Given a decline in oil prices, ``refiners are probably the more direct beneficiaries,'' said Gary Chan, a portfolio manager at Mirae Asset Global Investments (Hong Kong) Ltd., which oversees more than $3 billion. ``The airline sector is getting more and more competitive across the world. I think we can see a better entry point.''

The Hang Seng Index added 129.76, or 0.6 percent, to 22,079.51 at the 12:30 p.m. break, halting a two-day, 4 percent decline. The benchmark pared its loss this year to 21 percent as concerns eased that energy costs will rise further and curb spending and profits.

The Hang Seng China Enterprises Index, which tracks so- called H shares of Chinese companies, lost 0.3 percent to 11,913.29.

Li & Fung Gains

Li & Fung added 2.9 percent to HK$24.95, its biggest advance since July 30. Esprit Holdings Ltd., a Hong Kong-based global clothing retailer, climbed 4.1 percent to HK$83.30, making it the Hang Seng Index's second-biggest percentage gainer.

Sinopec, as China Petroleum is known, rose 1.6 percent to HK$8.20, its largest advance since Aug. 1. Sinopec said on July 17 that its first-half profit may have fallen by more than 50 percent amid rising crude oil costs. The Chinese government's controls on refined oil prices distorted the correlation with crude prices, Sinopec said.

Crude oil futures dropped 0.5 percent to $118.58 a barrel in New York yesterday, the lowest close since May 2. The contract was recently at $118.74 in after-hours trading.

Cathay Pacific, Hong Kong's biggest carrier, lost 4.6 percent to HK$14.06, its worst drop since July 2. The company posted the first loss in five years after fuel costs almost doubled and it set aside funds to cover a U.S. price-fixing fine. The first-half loss was HK$663 million ($85 million), the carrier said yesterday.

Goldman cut its price estimate for the stock by 19 percent to HK$11, according to a research note today. UBS trimmed its price forecast for the stock to HK$14.25 from HK$14.50.

Twenty-five stocks on the 43-member Hang Seng Index advanced while 14 dropped. August futures climbed 0.4 percent to 22,054.

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