Hong Kong Stocks Slide, Erasing Gains, as China Manufacturing Index Slows

Hong Kong stocks fluctuated after China’s manufacturing growth slowed for the first time in five months in December, countering gains in automakers on optimism demand growth can counter the end of tax incentives.

Angang Steel Co., China’s biggest Hong Kong-listed steelmaker, fell 1 percent. Longfor Properties Co., a developer in China, lost 2.4 percent on concern the nation’s tightening policies may hurt sales. Brilliance China Automotive Holdings Ltd., Chinese partner of Nissan Motor Co., climbed 4.6 percent, leading gains among.

China’s manufacturing is “still expanding but the fact that it has slowed may worry some,” said Andrew Sullivan, director of institutional sales at OSK Securities Hong Kong Ltd. “Also the expectation of more interest rate rises in early 2011 could result in more slowing ahead.”

The Hang Seng Index added 0.2 percent to 23,002.87 as of 2:58 p.m. local time, after dropping as much as 0.3 percent. The Hang Seng China Enterprises Index of so-called H shares of Chinese companies rose 0.6 percent to 12,588.66.

The Hang Seng Index has gained 5.2 percent this year, after rallying 52 percent in 2009, on speculation growth in corporate profits would counter China’s steps to curb property-price inflation, Europe’s debt crisis, and concern about the pace of the U.S. economic recovery.

Shares in the gauge trade at an average 14.4 times estimated earnings, compared with 17.2 times at the beginning of this year.

China Purchasing

Angang fell 1 percent to HK$11.80. Huaneng Power International Inc., a unit of China’s biggest electricity producer, lost 1 percent to HK$4.12. China National Building Material Ltd., a cement maker, slid 0.1 percent to HK$17.54.

A purchasing managers’ index released today by HSBC Holdings Plc and Markit Economics fell to 54.4 from 55.3 in November. A reading above 50 indicates an expansion.

Longfor lost 2.4 percent to HK$10.76. Country Garden Holdings Co., a developer controlled by billionaire Yang Huiyan, fell 1.7 percent to HK$2.90.

China will “resolutely” enhance property measures and curb excessive price gains in 2011, the official Xinhua news agency reported, citing Housing Minister Jiang Weixin. The government is preparing more macro control policies, Xinhua said.

Brilliance climbed 3.3 percent to HK$5.91, adding to yesterday’s 4.8 percent jump. BYD Co., an automaker backed by Warren Buffett, gained 0.8 percent to HK$40.80, extending a 1.4 percent advance yesterday. Geely Automobile Holdings Ltd., whose parent bought Volvo Cars, climbed 0.9 percent to HK$3.47, after rising as much as 1.7 percent.

General Motors Co., Geely Automobile Holdings Ltd. and BYD Co. said yesterday growing demand for cars in China will outweigh the impact from the end of tax incentives that boosted sales.

Twenty-three stocks advanced while 20 dropped and two were unchanged among the 45 constituents of the Hang Seng Index. Its futures dropped 0.1 percent to 22,963.

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

To contact the editor responsible for this story: Nick Gentle at ngentle2@bloomberg.net.

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