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Autos rev up alongside Tencent as Hong Kong shares hit fresh 26-month high

HONG KONG (Nikkei Markets) -- Hong Kong shares rose for a third day as earnings optimism continued to spur blue-chip companies, with heavyweight Tencent Holdings and Chinese automakers pacing gains.

The Hang Seng Index rose 0.6% to 27,854.91, its highest close since May 2015. Tencent, the city's most-valuable listed company, gained 2.5% to a record high. Geely Automobile Holdings jumped 6% to also reach an all-time peak after its July sales surged 88%. The auto company's shares have risen 165% so far this year, compared with a 73% rally during the period for Tencent, the second-best stock on the gauge. Both are due to report first-half earnings on Aug. 16.

Several other automobile companies listed in the city also raced ahead, with Great Wall Motor rising 4.9%, while Dongfeng Motor Group, BYD, BAIC Motor and Guangzhou Automobile Group climbed at least 2%. The performance stood out against a gauge of large Chinese companies in the city, which added 0.2%. The Shanghai Composite Index, meanwhile, increased 0.1%.

"The auto sector has a positive outlook and Geely is seen as a market leader," said Linus Yip, chief strategist at First Shanghai Securities. He noted there was a dearth of triggers that could provide investors with a "selling excuse" at the moment. "Maybe there will be some profit taking, but nothing more."

The Hang Seng Index has climbed 27% so far this year, on course for its best annual gain since 2009. It is trading at a price-to-earnings multiple of 14.4, compared with 15.3 for the Shanghai equity benchmark.

The yuan traded onshore strengthened 0.3% to 6.7030 against the U.S. dollar, its strongest level since October 2016. China's foreign-exchange reserves rose $24 billion last month to $3.08 trillion, according to official data released late Monday. The nation's exports and imports both grew at a weaker-than-expected pace in July, government data showed earlier on Tuesday.

Casino operator Galaxy Entertainment Group advanced 2.4% in Hong Kong, while its rival Sands China added 0.8%. Analysts at Sanford C. Bernstein said their channel checks indicated Macau's gross gaming revenue for Aug. 1 to Aug. 6 was at about 4.5 billion patacas ($560 million), or an average daily rate of about 750 million patacas, a 28% increase over the year-ago period.

Wanda Hotel Development jumped 16% after it denied media reports that it was planning to sell two projects in Australia. The clarification followed after the Australian Financial Review reported the company was "fielding offers" for two of its real estate projects in the country.

China Overseas Property Holdings surged 14% following a 36% increase in first-half profit.

Electrical-fittings maker Tongda Group Holdings tumbled 11% after saying an impairment charge and higher research-and-development expenses will likely lower first-half profit up to 30% from a year ago.

China Longyuan Power Group fell 0.5%, paring gains so far this month to 7.9%. Its July power generation amounted to 3.3 million megawatt hours, compared with 2.8 million megawatt hours a year ago.

Gemdale Properties jumped 5.2% after reporting a 167% surge in contracted sales for July.

Kaisa Group Holdings climbed 5.7% despite a 25% drop in July contracted sales.

China Silver Group rallied 7.4% after forecasting an increase of at least 50% in first-half net profit.

Texhong Textile Group rose 5.1% on expectations for a "substantial increase" in half-yearly earnings.

-- Suzannah Benjamin and V. Phani Kumar

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