Hong Kong stocks dropped, dragging the Hang Seng Index to a two-week low, after a slump in a measure of U.S. consumer confidence heightened investors’ concern the recovery in the world’s biggest economy will falter.
Li & Fung Ltd., the largest supplier for retailers including Wal-Mart Stores Inc., dropped 3.7 percent. Foxconn International Holdings Ltd., the world’s biggest contract maker of mobile phones, declined 6.9 percent after predicting a wider first-half loss. Jiangxi Copper Co., China’s biggest producer of the metal, fell 0.5 percent after commodity prices slumped the most in 10 months.
The Hang Seng Index dropped 0.6 percent to 20,128.99, its lowest close since June 15. The Hang Seng China Enterprises Index of so-called H-shares of Chinese companies declined 0.6 percent to 11,466.24.
“People are still cautious given signs of economic slowdown,” said Terrace Chum, who helps manage about $6 billion at MFC Global Investment Management in Hong Kong. “We need to have a clearer sense of where the Chinese economy is heading.”
The Hang Seng Index has dropped 5.2 percent this quarter, extending its decline this year to 8 percent, as worries about budget deficits in Europe and tighter monetary policy in China dented confidence in the strength of the global economy.
Shares of exporters declined after the Conference Board’s U.S. consumer confidence index fell to 52.9 this month, below the lowest forecast of economists surveyed by Bloomberg News, from a revised 62.7 in May, figures released by the New York- based private research group yesterday showed. The index averaged 97 during the economic expansion that ended in December 2007.
Li & Fung, Foxconn
Li & Fung, which counts the U.S. as its biggest market, dropped 3.7 percent to HK$35.15. China Cosco Holdings Co., the nation’s largest container carrier, slipped 1.5 percent to HK$8.03.
Foxconn slumped 6.9 percent to HK$5.11, the biggest decline in the Hang Seng Index today. The supplier to Nokia Oyj and Motorola Inc. said losses in the first half will be more than the $19 million it reported last year due to lower product prices and higher depreciation costs.
Margins of exporters are also getting squeezed due to rising labor costs in China, MFC Global’s Chum said. Foxconn this month raised salaries at its factories in China and pledged to double them by October after being criticized for contributing to worker suicides.
Futures on the Hang Seng Index lost 0.5 percent to 20,093. Five stocks dropped for every three that rose on the 43-member gauge. Shares on the benchmark index are priced at an average 13.3 times estimated earnings, down from 18 times on Nov. 16, when the gauge closed at its 2009 high.
Jiangxi Copper slid 0.5 percent to HK$14.70. Aluminum Corp. of China Ltd., the nation’s biggest supplier of the metal, dropped 1.8 percent to HK$6.02. United Co. Rusal, the world’s biggest aluminum producer, declined 4.2 percent to HK$7.09.
Shares of raw material suppliers slipped after the Reuters/Jefferies CRB Index, which tracks prices of commodities from copper to corn, dropped 2.8 percent in New York yesterday, its biggest decline since August 2009.
Concerns over the strength of economic growth in China weighed on Hong Kong stocks for a second day. There are “recession signals in China,” Jim Walker, managing director at Asianomics Ltd., said on Bloomberg Television from Singapore.
Stocks fell yesterday after the Conference Board revised its China leading economic index to an increase of 0.3 percent in April, less than the 1.7 percent gain initially reported on June 15. The research group said yesterday that the previous release contained a calculation error.
Industrial & Commercial Bank of China Ltd., the nation’s biggest lender, slipped 0.7 percent to HK$5.72. China Construction Bank Corp., the second-biggest, lost 0.8 percent to HK$6.34. Bank of Communications Co., the fourth-largest, dropped 1.4 percent to HK$8.29.
Declines in banking shares have also been attributed to concern Agricultural Bank of China Ltd.’s initial public offering may divert investor funds away from other lenders during a slump in the nation’s equity markets.
“The size of the IPO is big, but there’s still plenty of liquidity in the market,” Ronald Arculli, chairman of Hong Kong Exchanges & Clearing Ltd., said at an investor conference today in the Chinese city. “So there’s a psychological impact rather than actual impact.”
Agricultural Bank said on June 28 it set a price range for the Shanghai part of its IPO that will allow it to raise as much as $20.1 billion.
Lee & Man Paper Manufacturing Ltd. dropped 1.5 percent to HK$5.82. Credit Suisse Group AG downgraded the stock to “neutral” from “outperform.”