Hong Kong shares rose 0.51 percent on Thursday following a rally on Wall Street and as a survey indicated manufacturing activity in China had seen a sharp improvement in May. The benchmark Hang Seng Index was up 117.24 points at 22,953.76 on turnover of HK$62.52 billion (US $8.07 billion). HSBC said early results from its purchasing managers index (PMI) suggest activity at Chinese factories shrinking at a much slower pace in May than April. The banking giant's PMI improved to 49.7 - a five-month high - from 48.1 last month.
While the figure is below the 50-mark, suggesting contraction, it is the second straight month of improvement and will fuel hopes that the world's number two economy is picking up. "Some tentative signs of stabilisation are emerging, partly as a result of the recent mini-stimulus measures and lower borrowing costs," HSBC economist Qu Hongbin said in a statement. However, he added that "downside risks to growth remain, particularly as the property market continues to cool".
Natural gas distributors surged after Beijing and Moscow signed a 30-year deal for Russia to supply China natural gas. The $400 billion agreement will see Russia's Gazprom supply state-owned China National Petroleum Corp (CNPC) with the energy. PetroChina rose 1.83 percent to HK$9.47.
China Gas Holdings jumped 6 percent to HK$13.08 while China Resources Gas gained 3.9 percent to HK$25.40. The two companies have a big presence in the parts of China where there has been a lack of supply, said Bank of America Merrill Lynch analysts, according to Dow Jones Newswires. The pact with Russia "will play a big part in raising China's gas supply by securing a long-term stable supply situation," they added. Internet firm Tencent rose 0.54 percent to HK$112.3, insurer Ping An jumped 2.47 percent to HK$58.15 and banking giant ICBC was 1.63 percent higher at HK$4.98.
Cathay Pacific Airways added 0.55 percent to HK$14.68 but HSBC eased 0.12 percent to HK$80.70. But in China the benchmark Shanghai Composite Index reversed early advances owing to profit-taking, ending down 0.18 percent, or 3.66 points, at 2,021.29 on turnover of 59.5 billion yuan ($9.5 billion). The Shenzhen Composite Index, which tracks stocks on China's second exchange, edged up 0.07 percent, or 0.68 points, to 1,028.68 on turnover of 81.6 billion yuan.
"The PMI figure led to earlier gains in the market but with no fresh funds coming to the market, the gains were hardly sustainable," Haitong Securities analyst Zhang Qi told AFP. PetroChina, the listed unit of state-owned CNPC, fell 0.39 percent in Shanghai to 7.64 yuan despite the China-Russia gas contract. But gas distributors were higher on hopes the deal will boost their business. Changchun Gas surged by its 10 percent daily limit to 7.68 yuan while Shenzhen Gas jumped 5.54 percent to 7.43 yuan. Other resources shares extended losses on worries over the domestic economy. Yunnan Coal Energy lost 5.62 percent to 10.75 yuan while Jiangxi Copper dropped 1.30 percent to 12.15 yuan.
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