Hong Kong Stocks Rebound; Cathay, Mengniu Dairy Lead Advance

By Hanny Wan

July 7 (Bloomberg) -- Hong Kong stocks rose, with the benchmark index rebounding from a one-week low. Cathay Pacific Airways Ltd. and China Resources Enterprise Ltd. climbed after their shares were upgraded by brokerages.

Cathay Pacific, Hong Kong’s largest airline, jumped 5.9 percent, after JPMorgan Chase & Co. lifted its rating on the stock to “overweight.” China Resources Enterprise Ltd., a retailer, rose 2.9 percent. China Mengniu Dairy Co., the nation’s biggest maker of liquid milk, rallied as much as 12 percent after Cofco (Hong Kong) Ltd. and Hopu Investment Management Co. agreed to buy a 20 percent stake in the company.

“Airlines may see demand coming back as it’s widely expected the global economy will start to recover by the end of this year,” said Castor Pang, a strategist at Sun Hung Kai Securities in Hong Kong. “Chinese consumption plays will be safer bets as the economy sees steady growth.”

The Hang Seng Index added 0.7 percent to 18,097.08 at the 12:30 p.m. break, having closed yesterday at its lowest level since June 24. The Hang Seng China Enterprises Index, which tracks so-called H shares of Chinese companies, advanced 0.5 percent to 10,877.22.

Cathay Pacific surged 5.9 percent to HK$10.86, the sharpest gain on the benchmark index. JPMorgan lifted its recommendation on the stock to “overweight” from “underweight” on capacity cuts and expected fuel-hedging gains.

Mengniu Purchase

China Resources added 2.9 percent to HK$15.48. CLSA resumed coverage on the stock with a “buy” rating, saying the company’s retail business will benefit from an increase in China’s consumption in 2010, the brokerage said.

Mengniu added 2.4 percent to HK$19.56, after gaining HK$6.12 billion ($790 million) of capital from Cofco and Hopu. The stock rallied as much as 12 percent today as trading resumed after a one-day suspension. Cofco, part of China’s biggest grain trader, and Hopu will acquire a 20 percent stake from the dairy company and shareholders, Mengniu said yesterday.

Credit Suisse Group lifted its rating on the stock to “neutral” from “underperform.”

Tencent Holdings Ltd., operator of China’s biggest online chat service, climbed 3.4 percent to HK$90.50. BNP Paribas SA lifted its share-price estimate for the stock to HK$100 from HK$82.

Almost three stocks rose on the 42-member Hang Seng Index for each that dropped. July futures added 0.8 percent to 18,072.

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