Hong Kong Stocks Climb Most in a Month as Banks, Tencent Rally

(Bloomberg) -- Hong Kong stocks rose, with the benchmark gauge gaining the most in a month, as banks led a rally by Chinese companies after a technical indicator signaled recent losses were excessive.

The Hang Seng Index added 0.8 percent to 21,754.74 at the close, rebounding from a five-month low. China Construction Bank Corp. surged the most in 10 months, while Tencent Holdings Ltd. jumped 2.2 percent. Stocks extended gains in afternoon trading as the pace of buying by mainland investors through the Shanghai link accelerated. The Shanghai Composite Index slipped 0.4 percent to its lowest level since Oct. 31.

Hong Kong’s benchmark index has slumped 6.6 percent this quarter, the world’s worst performance after the Philippines and New Zealand, as higher borrowing costs undermined the outlook for the city’s property market and a weaker yuan cut foreign demand for Chinese assets. The Hang Seng Index’s relative strength fell earlier Wednesday to 28.5, the lowest since January, and below the 30 level that signals to some traders shares are due to rebound.

"The trading volume is thin so portfolio managers with extra cash and flexible mandates can move markets with a relatively small amount of capital," said Ken Peng, Hong Kong-based investment strategist at Citigroup Global Markets Asia Ltd. "January is probably still going to be tough because the liquidity situation won’t be fully resolved until after Chinese New Year.”

Net purchases by mainland buyers totaled 4.5 billion yuan for the day, the most since Nov. 9, exchange data show. China Construction Bank surged 4.8 percent, while Bank of China Ltd. climbed 1.2 percent. The Hang Seng China Enterprises Index rallied 1.3 percent, paring its decline in December to 5.5 percent. 

Most of Hong Kong’s stock losses occurred in December as the U.S. projected a faster pace of interest-rate hikes next year and China tightened liquidity to ward off bubbles, helping drive the city’s key interbank rate to an eight-year high. Hong Kong’s monetary policy is tied to the Federal Reserve’s through a currency peg.

• For the year, the Hang Seng Index is down 0.7%. Shanghai’s benchmark gauge has lost 12%
• Cheung Kong Property Holdings Ltd. declined for a sixth day
• Revenues, profits, jobs and capital expenditures in China improved from the third quarter while new orders were stable, according to the private survey released by CBB International, which collects anecdotal accounts similar to those in the Federal Reserve Beige Book

To contact Bloomberg News staff for this story: Helen Sun in Shanghai at hsun30@bloomberg.net, Jeanny Yu in Hong Kong at jyu107@bloomberg.net. To contact the editors responsible for this story: Richard Frost at rfrost4@bloomberg.net, Philip Glamann

With assistance from Jeanny Yu, Helen Sun