Hong Kong Stocks Drop for First Time in 10 Days, on European Debt Concerns

Hong Kong stocks fell for the first time in 10 days after Fitch Ratings cut its rating on BNP Paribas SA, heightening concern Europe’s debt crisis is worsening, countering gains in commodity producers. Foxconn International Holdings Ltd., the world’s biggest contract maker of mobile phones, slid 3 percent. HSBC Holdings Plc, Europe’s No. 1 bank by market value, declined 1 percent after Standard & Poor’s Ratings Services forecast difficult years for Spanish banks. Aluminum Corp. of China Ltd., the nation’s biggest producer of the metal, rose 1.5 percent.

The Hang Seng Index dropped 0.5 percent to close at 20,819.08, after climbing as much as 0.2 percent. The gauge advanced 7.9 percent in the previous nine days. The benchmark index surged 3.1 percent yesterday after China allowed the yuan to appreciate against the U.S. dollar.

“We’re due for consolidation before a second wave of the rally,” said Castor Pang, Cinda International Ltd’s research director in Hong Kong. “Yuan speculation is more of an excuse rather than serving as a real support.”

The Hang Seng China Enterprises Index of Chinese companies’ so-called H-shares fell 0.6 percent to 12,061.34.

The Hang Seng Index has dropped 4.8 percent this year as worries about budget deficits in Europe and credit tightening by China dented confidence in the strength of the global economy.

Shares on the benchmark index are priced at an average 13.7 times estimated earnings, down from 18 times on Nov. 16, the highest level in 2009, data compiled by Bloomberg show. Foxconn slid 3 percent to HK$5.76. HSBC declined 1 percent to HK$75.70. Esprit Holdings Ltd., which got 85 percent of its fiscal 2009 revenue from Europe, fell 3.2 percent to HK$45.10.

Europe Ratings Cuts

Fitch cut its long-term credit rating on BNP Paribas, France’s largest bank, citing a “deterioration” of the company’s asset quality. The report came as Standard & Poor’s slashed its economic growth forecast for Spain to an average of 0.7 percent a year through 2016 from 1 percent, saying Spanish banks face mounting credit losses and “substantial strain” on revenue generation.

Aluminum Corp., also known as Chalco, rose 1.5 percent to HK$6.64. Jiangxi Copper Co., China’s biggest producer of the metal, gained 0.6 percent to HK$15.94, extending yesterday’s 7.2 percent jump.

The London Metal Exchange Index of six metals including aluminum advanced 2.2 percent yesterday, halting three days of declines.

China Overseas Land & Investment Ltd., controlled by the nation’s construction ministry, dropped 1.7 percent to HK$16.32. China Resources Land Ltd., a state-controlled developer, declined 2.1 percent to HK$15.96.

China Real Estate

Real estate prices in larger Chinese cities are poised to steadily decline as government measures start to take effect, the National Development and Reform Commission said in a report relating to 36 large and medium-sized cities. It didn’t name the cities.

Tencent Holdings Ltd., a provider of Internet value-added services, slid 4.7 percent to HK$126 after China’s Ministry of Culture said it ordered a ban on Internet game operators offering virtual-currency services to minors.

Lee & Man Paper Manufacturing Ltd., the ninth best performer this year on the Bloomberg World Forest Products & Paper Index, retreated 3.9 percent to HK$6.43. The company said its controlling shareholder, Gold Best Holdings Ltd., agreed to sell a 12 percent stake to Nippon Paper Group Inc. for HK$3.55 billion ($457 million).

June futures on the Hang Seng Index declined 0.6 percent to 20,839. Twenty-five stocks dropped while 16 rose among the measure’s 43 constituents.

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

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