Hong Kong Stocks Rise to Two-Month High on Optimism China's Growth Intact

Hong Kong stocks rose, sending the Hang Seng Index to its highest level in two months, on signs earnings are improving and speculation China’s steps to slow inflation won’t curb the nation’s economic growth.

China Construction Bank Corp., the country’s second-largest lender, and smaller rival Bank of China Ltd. gained at least 1 percent. Aluminum Corp. of China Ltd., the No. 1 supplier of the metal, increased 2.9 percent on speculation demand will increase. Wynn Macau Ltd. advanced 4.4 percent after CLSA Asia-Pacific Markets said gaming revenue in the world’s biggest gambling hub will rise 30 percent this year.

“We’re still quite comfortable with China’s growth outlook despite the government’s efforts to rein in inflation,” said Terrace Chum, who helps manage about $6 billion at MFC Global Investment Management in Hong Kong. “Investors should remain cautious. We expect consumer prices to peak in the first half.”

The Hang Seng Index climbed 0.8 percent to 24,351.86 at the 12:30 p.m. trading break in Hong Kong, heading for its highest close since Nov. 11. Two stocks rose for each that dropped on the 45-member gauge. Its futures gained 0.7 percent to 24,368. The Hang Seng China Enterprises Index of so-called H shares of Chinese companies advanced 1 percent to 13,102.42.

The Hang Seng Index rose for a fourth straight week last week as banks extended their gains and concern about Europe’s debt crisis eased. Shares in the gauge traded at an average 13.1 times estimated earnings at the close yesterday, compared with about 17.2 times at the start of 2010.

‘Punitive Measures’

Government reports tomorrow will probably show inflation in China cooled to 4.6 percent in December and the economy likely expanded 9.4 percent in the fourth quarter, according to the median estimates of economists surveyed by Bloomberg News.

China ordered banks to set aside more reserves six times and boosted interest rates twice in 2010 to curb asset bubbles after record gains in lending and property prices. Last week, the People’s Bank of China ordered lenders to increase reserve ratios by another 50 basis points starting tomorrow.

“We’re still very positive on Asia and emerging markets, but a lot of governments in Asia are beginning to take quite punitive measures to rein in inflation,” Stephen Davies, Singapore-based chief executive officer of Javelin Wealth Management, said on Bloomberg Television. “Whilst those measures are working their way through in the system, I think we’re going to be seeing people focusing on what appears to be a steadily improving recovery story in the U.S.”

Macau Casinos

Industrial & Commercial Bank of China Ltd., the nation’s biggest lender, rose 0.5 percent to HK$6.03. China Construction Bank climbed 1 percent to HK$7.19. Bank of China increased 1.7 percent to HK$4.31.

Raw-material producers climbed on speculation continuing growth in the world’s fastest-growing major economy will boost demand. Jiangxi Copper Co., China’s biggest producer of the metal, rose 1.4 percent to HK$26.30. Aluminum Corp. of China increased 2.9 percent to HK$7.73. China Shenhua Energy Co., the largest coal producer in the country, advanced 2 percent to HK$33.70.

China Shipping Container Lines Co., the nation’s No. 2 carrier of sea-cargo boxes, climbed 3.1 percent to HK$3.94 before trading was halted. The company, which said yesterday that 2010 profit was “better than expected,” plans to release its earnings statement today, Li Yongliang, a spokesman, said by phone.

Wynn Macau paced gains among casino operators after CLSA raised its revenue growth forecast for the world’s biggest gambling hub to 30 percent from 20 percent.

Shares of the unit of the casino company, founded by billionaire Steve Wynn, jumped 4.4 percent to HK$21.45. Sands China Ltd. increased 2.6 percent to HK$19.68. SJM Holdings Ltd., controlled by billionaire Stanley Ho, gained 3.1 percent to HK$14.74.