Hong Kong Stocks Surge Most in Eight Months; Chinese Banks Soar

By Hanny Wan

Sept. 19 (Bloomberg) -- Hong Kong's benchmark stock index surged the most in eight months after China's government said it will buy shares of the nation's three largest banks.

Industrial & Commercial Bank of China Ltd. and China Construction Bank Corp. soared 17 percent. China Investment Corp., the nation's $200 billion sovereign wealth fund, will raise its holdings in the companies and Bank of China Ltd., according to the official Xinhua News Agency.

``It's better than doing nothing. It helps stabilize the market,'' said Desmond Tjiang, who helps manage $2.5 billion in Asian equities at Fortis Investment Management in Hong Kong. Tjiang said he doesn't think the rally is sustainable because ``it helps sentiment, but not the economy. We're pretty defensive. We're waiting. Our cash level is above average.''

The Hang Seng Index soared 1,449.85, or 8.2 percent, to 19,082.31 as of 2:59 p.m. local time, its sharpest jump since Jan. 23 and trimmed its losses this week to 1.4 percent. The measure plunged 15 percent in the past seven sessions, its longest losing streak since a seven-day drop through April 2004.

The Hang Seng China Enterprises Index, which tracks so- called H shares of Chinese companies, soared 13 percent to 9,762.40, its largest advance since Sept. 4, 1998.

ICBC, China's No. 1 bank, soared 17 percent to HK$4.71, the biggest jump since its debut on Oct. 27, 2006. Construction Bank, the second largest, advanced 17 percent to HK$5.49.

CIC will buy stakes in the three banks through unit Central Huijin Investment Co., according to Xinhua.

French Connection

Bank of China, the third-largest, climbed 13 percent to HK$3.26. The company will buy a 20 percent stake in La Compagnie Financiere Edmond De Rothschild for 236 million euros ($342 million). The French fund-management unit of privately held bank LCF Rothschild Group, and Bank of China will begin an asset- management and private-banking venture, according to a statement yesterday.

Shares also rose as investors took advantage of recent declines to buy stocks.

China Overseas Land & Investment Ltd., a developer controlled by China's construction ministry, soared 17 percent to HK$9.85. The stock's 14-day relative strength index, which shows how rapidly prices have advanced or dropped, fell to 23 yesterday, below the level of 30 that some investors and traders use as a trigger to buy.

China Shenhua Energy Co., the country's biggest coal producer, surged 22 percent to HK$21.40, making it the largest percentage gainer on the Hang Seng Index. The stock's 33 percent slump in the past seven sessions drove its 14-day RSI to 24 yesterday. Hong Kong Exchanges & Clearing Ltd., which operates the city's stock market, jumped 13 percent to HK$99.05. The stock's 12 percent slump in the past seven days dragged its 14- day RSI to 30 yesterday.

Thirty-four stocks on the 43-member Hang Seng Index advanced while eight declined. September futures climbed 5.5 percent to 18,737.

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