Hong Kong shares rose to their highest level in three months on Thursday after data showed China's factory output slowed to its weakest in more than three years, missing forecasts and rising expectations that Beijing will move to boost growth. But the gains came in turnover consistent with the average so far this week, suggesting investors remained guarded with more China data expected on Friday for trade and loan growth in July.
--- StanChart extends recovery from Tuesday's fall
The Hang Seng Index closed up 1 percent at 20,269.5, the highest since May 9. Chart resistance is next seen at around 20,439, the 23.6 percent Fibonacci retracement of its rise from October lows to February highs. The CSI300 Index of the top Shanghai and Shenzhen listings rose 0.9 percent, while the Shanghai Composite Index gained 0.6 percent. Both finished at their highest points since mid-July, with Shanghai volumes above average for the fourth-straight day.
"Trading (was) still very passive, although some are cautiously hopeful of some more moves to boost growth after the weaker than expected producer-price numbers," said Jackson Wong, Tanrich Securities' vice-president for equity sales. Other data released on Thursday showed that while annual consumer inflation eased to 1.8 percent in July from 2.2 percent in June, producer prices fell by a steeper-than-expected 2.9 percent on the year, compared to the Reuters forecast for a 2.5 percent decline and June's 2.1 percent drop.
Growth-sensitive sectors made some of the biggest gains among benchmark components. Aluminium Corporation of China (Chalco) rose 2.4 percent, while Chinese discretionary consumption stocks were among the top performers on the day. GOME Electrical Appliances and Li Ning both spiked more than 9 percent, while Yurun Foods jumped 6.9 percent. Standard Chartered jumped 4.3 percent in strong volumes after the British bank won help on Wednesday from Britain's central bank governor, who portrayed New York banking regulator Benjamin Lawsky as marching to his own tune, out of step with federal regulators in Washington.
StanChart has now risen 3.7 percent in two days after plunging almost 15 percent after New York's bank regulator threatened to strip the British bank of its state license, labelling it a "rogue institution" that allegedly hid $250 billion in illegal transactions tied to Iran.
Shares of Chinese property developers saw steady gains after China's State Council completed property market inspections. The teams it sent out were satisfied that all 16 provinces were adequately enforcing centrally-imposed curbs on the sector. Data on Thursday also showed Chinese property sales rose in July, reinforcing signs of a recovery in the sector even as investment growth slowed to a three-month low due to continuing government curbs.
In Hong Kong, Evergrande jumped 4 percent, while China Overseas Land gained 2.3 percent and China Resources Land firmed 2.6 percent. Poly Real Estate rose 1.6 percent in Shanghai, while China Vanke was up 0.8 percent in Shenzhen after late on Wednesday announcing plans for its first overseas property.
"We think the chance of new policy roll-outs is unlikely, but enforcement of existing measures will likely be tightened," Bank of America-Merril Lynch analysts said in a note to clients before Thursday's China data release. "Tighter policies, together with high inventory level in the industry, will likely prevent home prices from rebounding, thus removing the needs of new policies, in our view," they added.
Hong Kong-based exporter Li & Fung jumped 3.1 percent ahead of its first-half earnings. It posted a better-than-expected first half net profit of $312 million, compared with $235.5 million a year earlier and a $272.4 million average forecast. Li & Fung, which manages supply chains for major retailers such as Wal-Mart Stores Inc and Target Corp, is now up 11.1 percent in 2012, compared to 10 percent gain for the Hang Seng Index. Prior to Thursday, it was trading at 17.5 times forward 12-month earnings, a 19 percent discount from its historical median, according to Thomson Reuters StarMine. Three of 20 analysts downgraded their full year earnings-per-share estimates for Li & Fung by an average of 12.1 percent in the last 30 days, according to StarMine.
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