(Bloomberg) -- Hong Kong stocks climbed, capping the biggest monthly advance since January, with Chinese investors piling into the city's stocks amid tightening liquidity on the mainland. HSBC Holdings Plc surged to the highest since 2014 after announcing a buyback plan and a profit increase.
The Hang Seng Index added 1.3 percent to 27,323.99 at the close, extending the month's rise to 6.1 percent. Kunlun Energy Co., Power Assets Holdings Ltd. and China Shenhua Energy Co. added at least 12 percent from the beginning of July. Energy stocks were among the biggest gainers Monday, with China Shenhua rising the most in more than a week after saying its first-half profit probably doubled.
Hong Kong stocks have risen every month this year amid inflows from the mainland, with Chinese investors purchasing a net 42 billion yuan ($6.2 billion) of the city's stocks in July, up from the previous month, according to Bloomberg calculations. Dovish signals from the Federal Reserve have helped also because Hong Kong's currency peg to the greenback compels it to import U.S. monetary policy.
"Hong Kong stocks have been rising on the back of abundant capital inflows," said Castor Pang, head of research at Core-Pacific Yamaichi HK. "This liquidity-driven rally should persist as mainland tightening may continue to lure onshore investors, and global fund managers lift their risk appetite with the U.S. signaling gradual rate hikes."
On the mainland, the Shanghai Composite Index rose 0.6 percent, extending its gains for the month to 2.5 percent. The ChiNext Price Index of small caps climbed 0.1 percent, paring July's decline to 4.5 percent.
China's official factory gauge dialed back a notch in July as a push by authorities to curb financial risks spreads. The manufacturing purchasing managers index slowed to 51.4 in July, missing the 51.5 forecast in a Bloomberg survey and down from 51.7 in June. A statistics official attributed the slowdown to high temperatures in some regions and floods in others, while some factories had regular equipment maintenance.
- China Shenhua, the nation's biggest coal miner, advanced 3.7% in Hong Kong. The Beijing-based company, which also runs power stations and railroads, estimated net income during January-June rose 143% from a year earlier.
- Kunlun advanced 2.8%, while Power Assets added 0.3%.
- HSBC Holdings Plc climbed 2.6% after posting a second quarter of revenue growth and announcing a plan to return another $2 billion of cash to investors.
- Hutchison Telecommunications Hong Kong Holdings Ltd. soared 6.8%, after the company agreed to sell its fixed-line unit to I Squared Capital for HK$14.5 billion ($1.86 billion) in cash. Morgan Stanley analysts including Gary Yu wrote in a note Sunday that they expect a "sizeable" dividend upon deal completion, given the track record of major shareholder CK Hutchison Holdings Ltd.
- Steelmakers advanced after the industry's purchasing managers' index for July rose to the highest in 15 months. Mills in China are benefiting from rising product prices and strong profit margins after the government shuttered some capacity. Maanshan Iron & Steel Co. advanced 8% in Hong Kong, while Hesteel Co. climbed 7.6% in Shenzhen.
- Shares in Chinese shipping companies and port operators climbed. Stronger demand and a potential container shortage have lead to a rebound in freight rates, Jefferies analyst Andrew Lee wrote in a note dated Monday. Bocom International also weighed in, writing that container shipping is seeing a general recovery. Pacific Basin Shipping Ltd. advanced 6.2%, the most since April, while Cosco Shipping Holdings Co. climbed 5.2%.
- The Chinese insurance industry watchdog said over the weekend that it will curb insurers being manipulated by major holders. Separately, the banking regulator warned that the industry faces relatively high pressure of a rebound in non-performing assets. Irregularities exist in China's asset management industry, Tao Ling, deputy head of the financial stability bureau at the PBOC, said at a conference in Shanghai.
--With assistance from Philip Glamann
To contact the reporter on this story: Jeanny Yu in Hong Kong at jyu107@bloomberg.net.
To contact the editors responsible for this story: Robin Ganguly at rganguly1@bloomberg.net, Ryan Lovdahl
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