Hong Kong Stocks Rise for Third Day as Oil Boosts Energy Shares

(Bloomberg) -- Hong Kong stocks rose for a third day as energy companies surged after OPEC agreed to a preliminary deal that will cut output for the first time in eight years. Developers retreated.

The Hang Seng Index climbed 0.5 percent at the close. Cnooc Ltd. and China Petroleum & Chemical Corp. advanced at least 4 percent, while China Oilfield Services Ltd. jumped the most since October, after U.S. crude held near $47 a barrel. A gauge of real estate companies dropped 0.4 percent, led by China Resources Land Co. Hsin Chong Group Holdings Ltd. plunged by a record as shares resumed trading after Anonymous Analytics rated it a "strong sell." The Shanghai Composite Index advanced 0.4 percent.

The Organization of Petroleum Exporting Countries agreed to trim production following an informal meeting in Algiers. Concern over a global glut has weighed on crude prices for at least the past two years. The Hang Seng Index has gained 14 percent this quarter, Asia’s biggest advance, as mainland inflows swelled via an exchange link with Shanghai and traders scaled back bets for higher U.S. borrowing costs. Mainland markets will be shut next week for holidays.

"In the short term oil prices will support energy stocks," said Sam Chi Yung, senior strategist at South China Financial Holdings Ltd. in Hong Kong. "Since China holidays are coming up and the stock connect is closed, Hong Kong market’s turnover will be slow in general."

Mainland Inflows

The Hang Seng Index rose to 23,739.47, while the Hang Seng China Enterprises Index climbed 0.8 percent, extending its quarterly gain to 12 percent. The Shanghai Composite Index has advanced just 2.4 percent in the period. Trading volume on the CSI 300 Index was 37 percent below the 30-day average for this time of day.

Net buying of Hong Kong shares through a link with Shanghai totaled 58.7 billion yuan ($8.8 billion) this month, compared with purchases of just 1.75 billion yuan in the other direction. That’s helped narrow a valuation gap between dual-listed shares in Hong Kong and Chinese exchanges to near the smallest since 2014. The connect is closed from today until Oct. 11.

Annual Loss

The Shanghai Composite will end the year at 3,075, according to the median forecast in a Bloomberg poll of 10 strategists and fund managers. That implies a 13 percent drop over the 12-month period, the steepest in five years, and a gain of 2.9 percent from Wednesday’s close. Fading prospects for monetary easing, a slowing economy and the risk of higher U.S. borrowing costs spurring yuan weakness were among factors weighing on the nation’s shares, the survey showed.

Cnooc and China Petroleum & Chemical, better known as Sinopec, both capped their biggest gains since mid-April. OPEC said its members reached a preliminary agreement to cut output to a range of 32.5 million to 33 million barrels per day, though the group won’t decide on targets for each country until a November meeting in Vienna.

The Hang Seng Properties Index retreated for a second day this week. The gauge has jumped 17 percent this quarter, the largest advance among four industry groups. China Resources Land dropped 1.5 percent, while Sino Land Co. slid 1.4 percent.

Hsin Chong fell 29 percent, after sinking as much as 57 percent earlier. The company said Anonymous Analytics adopted an “extremely negative” assessment of prospects.

To contact the reporter on this story: Kana Nishizawa in Hong Kong at knishizawa5@bloomberg.net. To contact the editors responsible for this story: Richard Frost at rfrost4@bloomberg.net, Sarah McDonald

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