Hong Kong stocks seen higher on China stimulus, easing Europe concern

Hong Kong stocks are set to open higher on Wednesday as investors cheer China's latest plan to inject more than 2 trillion yuan to develop energy-saving projects and Spain's tumbling short-term borrowing cost in its latest bond auction.

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Published: 8:08am, 22 Aug 2012Updated: 9:21am, 22 Aug 2012

Hong Kong stocks are set to open higher on Wednesday as investors cheer China's latest plan to inject more than 2 trillion yuan in energy-saving projects and welcome a fall in Spain's short-term borrowing costs -- signs of growing confidence in the troubled southern European economy.

China's cabinet said after the market close on Tuesday that it aims to invest as much as 2.37 trilion yuan to develop key projects aimed at cutting carbon emissions during the 12th five-year period which ends in 2015, according to a statement posted on the State Council's website. The market has been expecting China to announce further stimulus measures after economic growth in the world's second largest economy slowed to a three-year low.

Earnings results will remain in focus. State-owned China Telecom Corporation Ltd. (0728.HK), leading sportsware maker Li Ning Company Ltd (02331.HK), and jewellery retailer Luk Fook Holdings (International) Ltd (0590.HK) are among a batch of companies due to report first-half results later in the day.

The benchmark Hang Seng Index closed down 0.02 per cent at 20,100.09 on Tuesday, while the Hang Seng China Enterprises Index, which tracks the performance of Hong Kong-listed China enterprises, rose 0.32 per cent to close at 9,825.95.

European stocks ended higher overnight, after Spain paid sharply lower interest rates to raise 4.5 billion euro (US$5.54 billion) in a bond auction on Tuesday amid growing speculation that the crisis-stricken economy will agree to a bailout. In recent months, Spain's 10-year borrowing cost has pushed through 7 per cent, the level which triggered earlier bailout requests from Ireland, Greece and Portugal. Investors also believe the European Central Bank is moving closer to tackling the euro zone crisis. The benchmark FTSE 100 index gained 0.57 per cent to close at 5,857.52.

In the US, the S&P 500 Index closed down 0.51 per cent to 13203.58 as investors rushed to lock in profits after the gauge hit a four-year high during the day.