Hong Kong property stock rally gathers pace on earnings outlook

[SHANGHAI] A rally by Hong Kong property developers showed little sign of faltering amid optimism rising home sales will boost earnings.

Hong Kong real estate companies were among the biggest gainers on the benchmark Hang Seng Index, which fell 0.5 per cent as of 2.10pm local time, down from a 1 1/2 year high.

New World Development Co topped the gauge with a 3.5 per cent advance after reporting a 52 per cent increase in fiscal first-half earnings Wednesday. Sun Hung Kai Properties Ltd and Hang Lung Properties Ltd added at least 1.2 per cent each.

Hong Kong buyers have piled into new homes as government attempts to cool the world's priciest home market have nearly halted the supply of older, existing apartments.

New home sales soared 48 per cent in January over December, compared with a 76 per cent decline in the same period last year, according to data from the government and residential property agency Midland Realty.

"Property stocks extended gains after some developers reported good earnings," said Linus Yip, Hong Kong based strategist with First Shanghai Securities Co.

"As long as upcoming earnings remain stable, the rally will be sustained."

The Shanghai Composite Index retreated 0.7 per cent and the Hang Seng China Enterprises Index declined 0.4 per cent.

MGM China Holdings Ltd, Wynn Macau Ltd and Galaxy Entertainment Group all gained at least 1.8 per cent.

Valuations are attractive after declines of more than 10 per cent from a November peak, while monthly gaming revenue growth is expected to rebound to above 10 per cent on a low base, Hong-Kong based Nomura Securities analyst Richard Huang said in an interview Automakers declined in Hong Kong and the mainland, snapping a 3-day rising streak.

Guangzhou Automobile Group Co dropped 2.9 per cent in Hong Kong, while Dongfeng Motor Group Co slid 1.7 per cent New China Life Insurance Co fell 1.7 per cent in Shanghai.

China's top insurance regulator vowed Wednesday to "severely" punish short-term speculation by insurers and to curb "unreasonably" high returns of some insurance products.

BLOOMBERG