Hong Kong: Stocks climb from two-week low as casino shares rally

[HONG KONG] Hong Kong stocks rose from a two-week low as better-than-expected Macau gambling numbers lifted casino operators and concern about Deutsche Bank AG's financial health eased.

The Hang Seng Index climbed 1.2 per cent at the close, after slumping 1.9 per cent on Friday. Galaxy Entertainment Group Ltd rallied 2.9 per cent following data that showed Macau's gambling revenue rose 7.4 per cent in September.

Bank of East Asia Ltd led gains by lenders after Deutsche Bank was reported to be lining up a less-costly settlement with US regulators than investors feared.

China Overseas Land & Investment Ltd retreated following news that seven cities tightened rules for home purchases.

Relief swept over US and European equity markets late Friday as Agence France-Presse reported that Deutsche Bank was nearing a US$5.4 billion settlement with the US Department of Justice, less than half an initial request, that stemmed from a probe tied to residential mortgage-backed securities.

Financial companies account for 46 per cent of the Hang Seng Index's weighting. China's markets are shut for holiday this week.

"Gaming names are driven by good September results," said Yen Chiu, a Hong Kong-based trader at China Securities International Finance Holding Co.

"But we will have to see if the rebound is supported by sufficient volume. The market will fluctuate as China is off this week, with turnover likely to decline."

The Hang Seng Index rose to 23,584.43 on trading volume that was 48 per cent below the 30-day average for this time of day.

The gauge climbed 12 per cent last quarter, the most in Asia, as inflows swelled via an exchange link with Shanghai and traders scaled back bets for higher US borrowing costs.

The city's stocks tend to outperform global benchmarks on average in October, according to Bloomberg calculations based on data for the past 20 years.

The Hang Seng China Enterprises Index added 1.1 per cent on Monday.

A gauge of Macau casino operators rallied one percent, approaching its highest level since August 2015.

Galaxy Entertainment closed at the highest level since Sept 15, while Sands China Ltd advanced 1.8 per cent.

Last month's increase in gambling revenues was the second gain in row, after a 26-month slump, and beat the median estimate of a 4 per cent advance in a Bloomberg survey of analysts.

New projects from local units of Las Vegas Sands Corp and Wynn Resorts Ltd helped draw recreational gamblers.

China Construction Bank rebounded from its biggest loss in almost three weeks, while Bank of East Asia Ltd rallied 3.5 per cent, the most since May 17.

The financial woes of Germany's biggest lender as it struggles with tougher capital standards and soaring legal bills added to a list of market risks that includes Brexit and US monetary policy.

In other data, China's official factory gauge stayed at 50.4 in September, the highest level in almost two years for a second month and its services index increased to 53.7 from 53.5 in August, the National Bureau of Statistics said on Oct 1.

In Hong Kong, retail sales dropped for the 18th month in a row.

Mainland investors' purchases of Hong Kong stocks rose to a record last month, with net buying through the stock connect with Shanghai climbing to HK$59 billion (S$12 billion), according to exchange data and Bloomberg calculations.

That's the most since the program was launched in November 2014.

China Overseas Land fell the most on the Hang Seng Index Beijing on Friday increased down payments for first-time property purchasers to a minimum of 35 per cent of the selling price, the highest level among the country's biggest cities.

Sichuan's provincial capital Chengdu and Henan's Zhengzhou on Sunday banned people from buying a third property in some areas.

"The restriction on property markets has some negative impact on Chinese developers, otherwise the market is in a pretty favourable mood as casino shares continue their rebound," said Castor Pang, head of research at Core-Pacific Yamaichi Hong Kong.

"The Hang Seng Index stands a good chance of climbing above the 24,000 level."

BLOOMBERG