Hong Kong shares climb to 15-month high, China has best week in a month

Fri Nov 2, 2012 5:11am EDT

* HSI climbs 1.3 pct on day, rises 2.6 pct for week

* CSI300 up 0.4 pct for day, 2.6 pct on week

* China equity fund inflows highest this year: EPFR Global

* Galaxy Entertainment at record high on Oct gambling revenue

By Clement Tan

HONG KONG, Nov 2 (Reuters) - Hong Kong shares had their best week in seven, with the Hang Seng Index hitting a 15-month high as fund inflows buoyed hopes of more gains before year's end, encouraging investors to build riskier positions.

Positive U.S. data helped, ahead of a non-farm payrolls report later in the day that is expected to show U.S. companies added workers in October at the fastest pace in eight months.

The Hang Seng Index rose 1.3 percent on Friday to 22,111.3, breaking above chart resistance at about 22,000 on its way to its highest close since Aug. 2, 2011. It gained 2.6 percent this week, its best weekly showing since Sept. 10-14.

In the mainland, the CSI300 Index of the top Shanghai and Shenzhen listings rose 0.4 percent on the day and 2.6 percent for the week. The Shanghai Composite Index gained 0.6 percent on Friday and 2.5 percent this week. It was the best week for Chinese markets since Sept. 24-28.

"We could see more gains from here because funds will need to chase performance as the year draws to a close," said Alan Lam, Julius Baer's Greater China equity analyst.

"Earnings were mostly in line and misses have not been too major. With data pointing to the China economy stabilizing, we may see more interest in Chinese equities after the 18th Congress meeting next week," Lam added.

Lam said the laggard H-shares would lead further gains in Hong Kong, noting the China Enterprises Index of the top Chinese listings in Hong Kong, or the H-share index is up 9 percent in 2012, compared with the Hang Seng Index's 20 percent ascent.

Gains in Hong Kong on Friday came in the highest turnover since Oct. 18. Daily average turnover has risen by about 20 percent since the start of September, spurred by improving China economic data.

A tranche of October data is expected late next week, including inflation, urban investment, industrial output and retail sales on Nov. 9, trade data on Nov. 10 and money supply and loan growth data anytime between Nov. 10 and 15.

Citing data from EPFR Global, which tracks fund flows, Lam said money coming into China equity funds rose for a seventh-straight week and was the most in almost two years.

Bourse operator Hong Kong Exchange (HKEx) rose 2.3 percent to its highest since mid-April on hopes that increased turnover will boost its bottomline.

The government of Hong Kong, a Chinese territory where most foreign investors have their China investments given the mainland's capital controls, said on Friday it had no plans to change its currency peg against the U.S. dollar. It dismissed talk that authorities are rethinking policy after being forced into heavy sales of the Hong Kong dollar to curb its strength.

MACAU CASINOS, JEWELLERS STRONG

Top performers on the day included the Macau gaming sector after gambling revenue there rose a better-than-expected 3.2 percent in October from a year earlier, buoyed by a week-long holiday in China that enabled cash-rich mainland gamblers to bet in the world's largest casino market.

Sands China soared 6.3 percent to the highest since late April, while Galaxy Entertainment was up 7.6 percent to a record high since listing 21 years ago.

China-focused jeweller Chow Tai Fook surged 9.6 percent in heavy volume, leading a sector rally as investors bet on a pick-up in luxury spending on hopes of favourable economic policies from the coming party congress in Beijing.

At China's 18th National Congress meeting, which starts on Nov. 8, a once-in-a-decade political transition will commence as the Chinese Communist Party elects new leaders, alleviating some political uncertainty for investors.

Positive Hong Kong September retail sales figure released late on Thursday also helped.

Chinese railway, steel, construction and other infrastructure-related shares gained as investors looked to add risk. In Hong Kong, Angang Steel climbed 6.1 percent, and China Railway Construction was up 5.9 percent.