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Hong Kong stocks rally to 9-month high

Hong Kong - Hong Kong stocks climbed to their highest level since November after Tencent Holdings, Ping An Insurance (Group) and Lenovo Group earnings topped estimates.

The Hang Seng Index jumped 1.1% as of 3:02 p.m. Tencent, which has the biggest weighting on the gauge, surged to a record after reporting a 47% rise in quarterly profit. Ping An Insurance and Lenovo gained at least 2.6%.

A measure of mainland financial companies erased gains after people with knowledge of the matter told Bloomberg News that state-backed funds had sold bank shares on Tuesday.

Hong Kong’s benchmark equity index has climbed 26% from its February low, one of the world’s best performances, as fears of a Chinese hard landing receded and the city’s property market stabilized amid an improving interest-rate outlook.

The announcement of a long-delayed exchange link with Shenzhen this week and better-than-expected corporate profits have given extra vigour to the rally, even as technical indicators flash a warning that gains may be overheating.

"There’s a euphoria," said Francis Lun, chief executive officer at Geo Securities in Hong Kong. "Given the economic conditions, investors were not expecting too much from earnings."

Earnings reports

Tencent jumped 5.2%, taking its rally in 2016 to 33%, the most among Hang Seng Index constituents. Second-quarter sales and profit beat analysts’ estimates as the operator of the WeChat and QQ social network services splashed out on mobile games and content.

Ping An, China’s second-largest insurer, advanced 2.6% after saying its first-half profit rose 18%.

Lenovo climbed 2.8%. The world’s biggest PC maker posted a 64% gain in first-quarter profit as it cut costs and was helped by new Motorola smartphone models.

China Unicom (Hong Kong) jumped 7.1%, the biggest gainer on the Hang Seng Index, even as its first-half net income tumbled 80%.

Chief executive officer Wang Xiaochu said the worst will soon be over for the company and that profit is likely to rise in the first half of next year.

Cathay Pacific Airways dropped for a second day after its first-half profit tumbled 82%. Swire Pacific, a conglomerate that owns a controlling stake in the airline, slid 1.8% after reporting a fall in its half-yearly earnings.

The Hang Seng Index traded at 23 051.37. The gauge’s 14-day relative strength index has risen beyond 70, a level that signals to some traders that a rally is about to reverse. The Hang Seng China Enterprises Index increased 0.4%.

Financial shares

The Shanghai Composite slipped 0.2% at the close. China Securities Finance Corp. and other government-linked funds sold shares including Bank of Ningbo on Tuesday, according to the people, who asked not to be identified because the information isn’t public.

Bank of Ningbo slumped 6.8% in Shenzhen on Tuesday, a day after the Shanghai gauge jumped to its highest close since January 8.

The lender advanced 1% on Thursday. A measure of mainland financial companies on the CSI 300 Index lost 0.2%, after rising as much as 1.3% earlier.

The Shanghai Property Index added 0.9%, after a plot of land in Shanghai sold for a record, underscoring soaring asset prices in China’s biggest cities.

The gauge has risen 15% this month amid speculation that merger activity in the industry will accelerate after China Evergrande Group acquired stakes in China Vanke and Langfang Development Company.

Beijing North Star climbed 1.8% in Shanghai after the property developer’s six-month profit increased about 30% from a year earlier.

Longfor Properties Company extended its gains in Hong Kong, adding 5.1% after saying its first-half core profit climbed.

Country Garden Holdings jumped 5% after the Chinese real estate developer reported during the trading break first-half core net income that beat estimates.

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