HK stocks bounce as H-shares shine; autos, casinos jump

Mon Jul 4, 2011 8:13am GMT
 

HONG KONG, July 4 (Reuters) - Hong Kong began the third quarter on a strong footing led by a bounce in China-related plays on optimism over a possible slowdown in tightening measures coupled with attractive valuations ahead of corporate results.

The benchmark Hang Seng index ended 1.7 percent higher at 22,770.5, closing above the 250-day moving average for the first time in three weeks with gains coming on healthier volumes suggesting investor sentiment was improving.

The China Enterprise Index closed up 2.4 percent, with banks the biggest boost after long-only investors, including macro funds, were spotted buying into the sector which has underperformed this year.

On the mainland, the Shanghai Composite closed up 1.9 percent at a 6-week high.

HIGHLIGHTS:

* A trader at a large Hong Kong-based brokerage said a U.S. macro fund was buying into Chinese banking shares, a sector often considered a proxy for the economy and one which has a large enough weighting on benchmark indices to lift the broader market. China Construction Bank , trading at valuations close to the lows of the financial crisis in 2008 of around 7 times forward 12-month earnings, was up 1.7 percent.

* Auto stocks rallied led by Warren Buffet-backed BYD Co which jumped 10.1 percent tracking the blistering performance of its Shenzen-listed A-shares which closed limit-up and are up 71 percent from their listing price of 18 yuan a share. Market players also cited talk of government agencies meeting to discuss policies to boost auto sales. Auto stocks have been hammered this year as an end to subsidies and sluggish sales prompted an exit from the sector. Dongfeng Group rose 6.9 percent while GAC Group rose 5.2 percent.

* Other consumer plays such as Chinese brewers and Macau casino operators also surged on Monday with interest in the sector partly triggered by China's move to offer deeper tax cuts for wage earners. Tsingtao rose 4.5 percent while China Resources was up 1.9 percent on over 8 times the average 30-day volume.

Data showing another strong month for Macau's gambling revenue lifted shares of casino operators. Wynn Macau rose 7.3 percent while SJM Holdings rose 4 percent. Traders said short-covering in autos and casinos in a rallying market also contributed to Monday's jump. (Reporting by Vikram Subhedar; Editing by Jacqueline Wong)

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