Hong Kong's Stocks Climb for Second Day on Bank Support Plans

By Hanny Wan

Oct. 14 (Bloomberg) -- Hong Kong stocks rose for a second day after governments in the U.S. and Europe agreed to buy stakes in banks, easing concern the global credit crisis will worsen and damp the city's economic growth.

Bank of East Asia Ltd., Hong Kong's third-biggest by assets, jumped 5.5 percent after the U.S. said it would spend up to $125 billion dollars to bail out nine of its banks. Henderson Land Development Co., a Hong Kong-based developer, soared 10 percent. Cnooc Ltd., China's biggest offshore oil producer, surged 15 percent after crude oil prices had the biggest jump yesterday in three weeks.

Government interventions can ``help ease concerns in the near term,'' said Mona Chung, a fund manager who helps oversee more than $2 billion at Daiwa Asset Management Ltd. ``As we are a long-only fund, we have been switching'' to selected shares after recent drops, she said, declining to be specific.

The Hang Seng Index climbed 715.67, or 4.4 percent, to 17,027.83 at the 12:30 p.m. break, adding to a 10 percent surge yesterday. The gauge slumped 16 percent last week amid a global rout that has erased $7 trillion of market value and prompted governments across the globe to step up measures to support banks.

The Hang Seng China Enterprises Index, which tracks so- called H shares of Chinese companies, added 6.5 percent to 8,609.55.

``There is a good case for a return to the 10,000 level'' in the H-share index because ``the possibility of a large-scale fiscal stimulus could positively influence both 2009 earnings and valuations,'' Goldman, Sachs & Co. analysts including Timothy Moe wrote in a research note today.


Banks Rise

Bank of East Asia rose 5.5 percent to HK$22.85. Rumors questioning the bank's stability last month led to the city's first bank run in more than a decade. The company said Sept. 24 its ``exposure'' to bankrupt Lehman Brothers Holdings Inc. and American International Group Inc., taken over by the U.S. government, is about $61 million, less than 0.2 percent of assets.

Bank of Communications Ltd., China's fifth largest, jumped 8.5 percent to HK$6.66. BOC Hong Kong (Holdings) Ltd., the city's biggest bank by assets, advanced 5.7 percent to HK$13. Morgan Stanley raised its rating on the stock to ``equal-weight'' from ``underweight'' because ``it's unlikely that they will have to write off any of their investment in bank bonds in the developed markets,'' according to a research note today.

Bush's Bailout

The Bush administration will announce a plan that includes spending about $125 billion buying stakes in nine banks including Citigroup Inc., Goldman Sachs Group Inc. and Morgan Stanley, people briefed on the matter said.

The U.K. agreed to invest 37 billion pounds ($64 billion) in banks including Royal Bank of Scotland Group Plc. France, Germany, Spain, the Netherlands and Austria committed 1.3 trillion euros ($1.8 trillion) to guarantee bank loans and take stakes in lenders.

Henderson Land jumped 10 percent to HK$30.65. Sun Hung Kai Properties Ltd., Hong Kong's No. 2 developer by market value, soared 10 percent to HK$73.35. Hang Lung Properties Ltd., a Hong Kong-based developer that also invests in mainland China, climbed 7.4 percent to HK$18.

The Hang Seng Property Index's 7.2 percent advance made it the biggest group percentage gainer on the broader Hang Seng Index. The property index tumbled 53 percent this year, the sharpest among the Hang Seng Index's four industry groups.

Cnooc soared 15 percent to HK$7.27, making it the Hang Seng Index's second-biggest percentage gainer. PetroChina Co., the nation's largest oil producer, rose 5.4 percent to HK$7.06.

Crude oil futures climbed 4.5 percent to $81.19 a barrel in New York yesterday, the biggest jump since Sept. 22. The contract was recently at $83.10 in after-hours trading.

All but five stocks on the 42-member Hang Seng Index advanced. October futures climbed 5.4 percent to 17,051.

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

Air China Ltd. (753 HK) added 24 cents, or 7.9 percent, to HK$3.29. The country's largest carrier by market value said yesterday domestic passenger traffic growth will rebound next year after snowstorms and tighter travel regulations during the Olympics cut demand this year.

PCCW Ltd. (8 HK) Hong Kong's biggest phone company, halted trading of its shares, pending the release of price-sensitive information, according to a statement. PCCW rose 5.5 percent to HK$2.90 before being suspended.

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