Hong Kong Stocks Advance for Second Day; Banks, Developers Gain

By Hanny Wan and Patrick Rial

March 11 (Bloomberg) -- Hong Kong stocks rose for a second day, led by bank shares on speculation the global financial system is headed for recovery after Citigroup Inc. and HSBC Holdings Plc said earnings are improving.

HSBC, Europe’s biggest bank, added 2.3 percent while its unit Hang Seng Bank Ltd. jumped 5.5 percent. Citigroup said it’s having its best quarter since 2007 and HSBC reported higher profits in China. China Overseas Land & Investment Ltd. rose 2.7 percent after the nation said spending on factories and property surged. China Resources Power Holdings Co., a mainland generator, surged 6.6 percent after saying electricity sales rose last month.

“The U.S. market should provide a short-term boost to stocks here,” said Michiya Tomita, a Hong Kong-based fund manager of Chinese stocks at Mitsubishi UFJ Asset Management Co., which oversees $61 billion. “Whether we embark on a rising trend remains to be seen. This market is not about to drastically recover, as you’ll see advances and retreats continue.”

The Hang Seng Index added 236.61, or 2 percent, to close at 11,930.66, extending its gains in the past two days to 5.2 percent. The benchmark index has lost 17 percent this year, dragging its valuation to 10 times estimated earnings, down from 18.6 times at the beginning of 2008.

The Hang Seng China Enterprises Index, which tracks so- called H shares of Chinese companies, advanced 1.9 percent to 7,007.74.

HSBC, which is raising 12.5 billion pounds ($17.2 billion) in a rights offer, added 2.3 percent to HK$38.45. HSBC Asia- Pacific Chief Executive Officer Sandy Flockhart said he’s “110 percent confident” that the rights offer will succeed and that he’s seen a positive response from institutional investors.

Hang Seng Bank

Separately, HSBC, which operates the largest branch network among foreign banks in China, said pretax profit rose 85 percent to 2.19 billion yuan ($320 million) last year in the world’s fastest-growing major economy.

Hang Seng Bank added 5.5 percent to HK$72.10. BOC Hong Kong (Holdings) Ltd., controlled by Bank of China Ltd., climbed 2.3 percent to HK$6.60.

Citigroup was profitable in January and February and is having its best quarter since the third quarter of 2007, Chief Executive Officer Vikram Pandit wrote in an internal memorandum.

Futures on the Standard & Poor’s 500 Index rose less than 0.1 percent. The gauge jumped 6.4 percent in New York yesterday, its best gain since November as financial stocks rallied, led by Citigroup, which soared 38 percent.

China Overseas Land, a developer controlled by the country’s construction ministry, rose 2.7 percent to HK$11.40. China Resources Land Ltd., a government-controlled developer, climbed 4 percent to HK$9.90.

Spending Beats Expectations

China’s fixed-asset investment in urban areas advanced 26.5 percent to 1.03 trillion yuan ($150 billion) from a year earlier, the statistics bureau said. That was more than the 21.5 percent median estimate in a Bloomberg News survey of economists.

China Resources Power added 6.6 percent to HK$14.30, halting a five-day, 7.5 percent decline. The mainland generator said yesterday electricity sales rose 17 percent to 4.64 million megawatt-hours last month from a year earlier.

All but six stocks on the 42-member Hang Seng Index advanced. March futures climbed 2.9 percent to 11,933.

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

Cathay Pacific Airways Ltd. (293 HK), Hong Kong’s biggest carrier, added 5.9 percent to HK$7.41 after reporting annual sales jumped 15 percent to HK$86.6 billion ($11.2 billion). That’s higher than the median HK$81.7 billion estimated by analyst. The airline reported a 2008 loss of HK$8.56 billion, its first in 10 years, after making wrong-way bets on fuel prices and a charge for an air-cargo price-fixing fine levied by the U.S.

Industrial & Commercial Bank of China Ltd. (1398 HK) added 1.6 percent to HK$3.26. The world’s largest bank by market value was raised to “outperform” from “neutral” at Macquarie Group Ltd., which said the company’s “defensive balance sheet mix” amid falling interest rates and its cost controls will be an advantage this year.

Lenovo Group Ltd. (992 HK) advanced 4.1 percent to HK$1.53. The computer maker’s Chairman Liu Chuanzhi said Lenovo will outperform the industry within a year, though he can’t predict when the company will return to profit.

To contact the reporters on this story: Hanny Wan in Hong Kong at hwan3@bloomberg.net; Patrick Rial at prial@bloomberg.net