Hong Kong Stocks Drop Most in Two Weeks; Ruinian Falls on Debut

Hong Kong stocks fell the most in two weeks, after the U.S. Federal Reserve raised its discount rate for the first time in more than three years, heightening concern stimulus programs are winding down.

Li & Fung Ltd. (494), the world’s largest supplier of toys, clothes and furniture to retailers, slid 3.6 percent. Esprit Holdings Ltd., a Hong Kong-based global clothing retailer, plunged 4.7 percent. Bank of Communications Ltd., China’s fourth largest bank, dropped 3.8 percent. Ruinian International Ltd. (2010), a producer of nutritional supplements, declined 7.7 percent on its debut.

“The market is overreacting to the news,” said Michiya Tomita, who helps manage $65 billion at Mitsubishi UFJ Asset Management Co. in Hong Kong. “There are also fewer market participants this week due to the Chinese New Year.”

The Hang Seng Index (HSI) fell 2.6 percent to close at 19,894.02, its biggest fall since Feb. 5. This extended the gauge’s losses this week to 1.9 percent.

The Hang Seng China Enterprises Index (HSCEI), which tracks the so- called H shares of Hong Kong-listed Chinese companies, slipped 2.9 percent to 11,263.83. China’s stock market will resume trading Feb. 22 after closing this week for the Lunar New Year. The central bank on Feb. 12 ordered mainland lenders to increase their reserve requirement for the second time in a month.

Shares on the Hang Seng Index were priced at an average 12.9 times estimated earnings, down from 18.1 times on Nov. 16 when the index closed at its highest level for 2009, according to Bloomberg data. Concerns over monetary tightening in China dragged down the shares of the country’s biggest lenders and have contributed to a 13 percent drop in the stock benchmark since the November high.

Federal Reserve

Esprit (330) slid 4.7 percent to HK$54.30. Li & Fung lost 3.6 percent to HK$35.10, after the world’s largest retailer Wal-Mart Stores Inc. (WMT) reported fourth-quarter sales that trailed its projection and predicted a “challenging” first quarter for U.S. stores.

After U.S. markets closed, the Federal Reserve Board raised the discount rate charged to banks for direct loans by a quarter point to 0.75 percent, effective Feb.19. It said the changes are intended to encourage financial institutions to rely more on money markets rather than the central bank for short-term financing.

Bank of Communications, China’s fourth largest bank, dropped 3.8 percent to HK$7.69. Bank of China Ltd., the No. 3, slid 2.9 percent to HK$3.71. Industrial and Commercial Bank of China Ltd., the world’s largest bank by market capitalization, declined 3 percent to HK$5.48. China Construction Bank Ltd. (939), the country’s second-biggest lender, slid 2.9 percent to HK$5.77. The Hang Seng Finance Index (HSF) fell 2.3 percent to 30,303.32.

Ruinian Debut

Ruinian International Ltd., the health-related products manufacturer, fell 7.7 percent to HK$2.77 on its debut.

Cnooc Ltd. (883), China’s biggest offshore oil explorer, slid 3.8 percent to HK$11.78. Petrochina Co. (857), the nation’s biggest oil company, lost 2.4 percent to HK$8.50. Crude for March delivery fell 1.5 percent in New York today, the first time drop in four days.

Standard Chartered Plc. (STAN) retreated 1.7 percent to HK$176.80, after CLSA Ltd. said the international banking group will underperform HSBC Holdings Plc. (HSBA) due to heightened concerns about indebtedness and job loss in the United Arab Emirates. HSBC, Europe’s biggest bank, slid 1.8 percent to HK$81.05.

One stock gained and 41 shares dropped among the 42 members in the Hang Seng Index. Bank of China (Hong Kong) Holdings Ltd., the Hong Kong-traded unit of BOC, added 0.9 percent to HK$17.34. Hang Seng Index futures slid 2.1 percent to 19,912.

To contact the reporter on this story: Hanny Wan in Hong Kong at hwan3@bloomberg.net

To contact the editor responsible for this story: Darren Boey dboey@bloomberg.net

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