Hong Kong Stocks Gain on Sign China Is Acting to Boost Growth

By Hanny Wan

Nov. 3 (Bloomberg) -- Hong Kong stocks rose after China's state news agency said the nation's central bank removed temporary controls on loans to bolster economic growth.

China Overseas Land & Investment Ltd. jumped 5.5 percent on speculation demand for real estate will climb. Cnooc Ltd., China's biggest offshore oil producer, advanced 4.9 percent after crude prices rose for a second day. Citic Resources Holdings Ltd. soared 19 percent after saying one of its units is considering a transaction.

The Chinese government's easing of loan policies will ``have a positive impact as far as stocks are concerned,'' said John Koh, regional investment director at MEAG Hong Kong Ltd., which manages the equivalent of $1.5 billion. ``Redemptions have decreased. Long-term investors are no longer selling.''

The Hang Seng Index climbed 375.70, or 2.7 percent, to close at 14,344.37, adding to an 11 percent advance last week. The Hang Seng China Enterprises Index, which tracks so-called H shares of Chinese companies, rose 3 percent to 6,806.33.

The Hang Seng Index has rebounded 30 percent since Oct. 27, its worst close since May 2004, after China cut interest rates for the third time in two months and Hong Kong followed the U.S. rate reduction last week. The gauge is still down 48 percent this year as global financial turmoil prompted Hong Kong to guarantee the city's bank deposits last month and to form a task force led by Chief Executive Donald Tsang aimed at alleviating the credit crisis.

Koh said while he's ``worried about banks as to what's still hidden,'' he has reduced holdings in defensive stocks, such as telecom, food, and pharmaceutical shares.

Controls Removed

China Overseas Land, a developer controlled by the nation's construction ministry, jumped 5.5 percent to HK$8.95, its highest close since Oct. 23. Shimao Property Holdings Ltd., a mainland Chinese developer, advanced 5.9 percent to HK$4.33.

China's central bank removed controls on loans to maintain stable, ``relatively fast'' economic growth and counter the global financial crisis, the official Xinhua News Agency reported Nov. 1.

The People's Bank of China will closely monitor the global financial turmoil and will use a combination of macro-economic policies to boost domestic demand, Xinhua quoted Li Chao, a central bank spokesman, as saying.

Cnooc advanced 4.9 percent to HK$6.61. PetroChina Co., the nation's largest oil producer, rose 4.4 percent to HK$5.95.

Crude oil futures added 2.8 percent to $67.81 a barrel in New York Oct. 31. The contract was recently at $67.44 in after- hours trading, after climbing as much as 2 percent.

Transaction Considered

Citic Resources soared 19 percent to 68 Hong Kong cents, its largest jump since Jan. 16, 2006. The Chinese metal producer turned oil supplier said Oct. 31 one of its units is considering a transaction, without giving details.

More than eight stocks on the 42-member Hang Seng Index advanced for each that dropped. November futures climbed 1.8 percent to 14,186.

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

Cathay Pacific Airways Ltd. (293 HK) climbed 37 cents, or 4 percent, to HK$9.70. Hong Kong's largest carrier plans to sell five aircraft as part of its plans to slow fleet expansion and to boost cash reserves amid an expected drop in revenue. The sale of the five Boeing 777-200 jets isn't aimed at reducing flight frequencies or destinations, ``though some minor adjustments will be necessary,'' Chief Executive Tony Tyler said Nov. 1.

China Coal Energy Co. (1898 HK), the nation's second- largest coal producer by sales, advanced 17 cents, or 3.8 percent, to HK$4.65. JPMorgan Chase & Co. raised its rating on the stock to ``overweight'' from ``neutral'' because the company ``is unlikely to lose money in the next one to two years,'' according to a research note released today.

CLP Holdings Ltd. (2 HK) rose HK$2.55, or 4.9 percent, to HK$54.55. A CLP-led bid has been shortlisted to buy power assets from Temasek Holdings Ltd., the investment unit of the Singapore government, the South China Morning Post reported, citing unidentified people in the market. The deal may be worth as much as $2.5 billion, the newspaper said.

Fubon Bank (Hong Kong) Ltd. (636 HK), the Hong Kong unit of Taiwan's second-biggest financial services company, soared HK$1.25, or 81 percent, to HK$2.80, its biggest jump on record, on speculation a visit to Taiwan by China's top envoy will bolster trade. Chen Yunlin arrived in Taipei today, making him the highest-ranking mainland official to visit since Chiang Kai- shek's Kuomintang established a separate government there after retreating to the island at the end of a civil war in 1949.

Hutchison Telecommunications International Ltd. (2332 HK), the emerging-markets mobile-phone carrier controlled by billionaire Li Ka-shing, advanced 32 cents, or 3.8 percent, to HK$8.70 after saying it's considering paying a dividend. The company will hold a board meeting on Nov. 12 to discuss dividends, according to a statement late yesterday.

Johnson Electric Holdings Ltd. (179 HK) slumped 20 cents, or 13 percent, to HK$1.40. The Hong Kong-based maker of electric motors for automakers including Ford Motor Co. said first-half profit may drop 42 percent to about $46 million because of higher costs, and will then rebound.

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