Hong Kong Stocks Fall as IMF Cuts GDP Outlook, Oil, Metals Drop

Hong Kong stocks fell for a second day after the International Monetary Fund cut its economic growth forecast for the U.S. and Japan, and as commodity producers dropped on lower oil and metal prices.

Cnooc Ltd. (883), China’s biggest offshore oil producer, dropped 2.9 percent. Aluminum Corp. of China Ltd., the nation’s largest producer of the lightweight metal, slid 1.8 percent. China Telecom Corp., the country’s No. 1 fixed-line carrier, sank 5.2 percent after Pacific Crest Securities Inc. reduced its rating to “sector perform” from “outperform.”

“The stock market already had strong accumulated gains, so it has already started some correcting pressure,” said Ben Kwong, chief operating officer at KGI Asia Ltd. Some traders may be “unwinding their positions to lock in the profit in commodities and the stock markets.”

The Hang Seng Index slid 1.3 percent to 23,976.37 at the close, with more than six stocks falling for every one that rose on the 45-member Hang Seng Index. (HSI) The Hang Seng China Enterprises Index of Chinese companies’ H-shares declined 1.8 percent to 13,437.53. Stocks extended declines after Japan’s Nuclear and Industrial Safety Agency raised its assessment of the Fukushima nuclear accident to 7.

China’s consumer prices likely rose 5 percent in March, China Business Indepth reported in a flash headline on its website yesterday, citing an official of the National Bureau of Statistics. The figure, together with first-quarter gross domestic product, is due to be released on April 15.

U.S. stocks and crude prices fell yesterday after the IMF cut its estimate for growth in the U.S., the world’s biggest economy and oil consumer. In New York, the Standard & Poor’s 500 Index dropped 0.3 percent yesterday while futures on the U.S. equity benchmark slid 0.6 percent today.

Japan Growth

The U.S. economy will expand 2.8 percent this year, slowing from 2.9 percent last year and less than the 3 percent for 2011 forecast in January, the IMF said. The Washington-based fund also cut its estimate of Japan’s growth to 1.4 percent from 1.6 percent in the previous forecast after the March 11 earthquake and tsunami.

Cnooc dropped 2.9 percent to HK$19.86, while PetroChina Co., the nation’s No. 1 energy producer, declined 4.9 percent to HK$11.74. They were among the three biggest drops in the Hang Seng Index.

Oil for May delivery tumbled from a 30-month high, dropping 2.5 percent to settle at $109.92 a barrel in New York yesterday.

Aluminum Corp. of China, known as Chalco, lost 1.8 percent to HK$7.60 after Alcoa Inc., the largest U.S. aluminum producer, reported first-quarter sales that missed analysts’ estimates. Separately, the Ministry of Finance may cut export rebates for some aluminum products to 9 percent from 13 percent, the China Securities Journal reported, without citing anyone.

Miners Decline

Jiangxi Copper Co., China’s No. 1 producer of the metal, retreated 3 percent to HK$26.30, while Zhaojin Mining Industry Co., a miner based in China’s Shandong province, slid 0.4 percent to HK$36.65.

The London Metal Exchange Index of prices for six industrial metals including copper and aluminum fell for the first time in five days yesterday, dropping 0.2 percent.

China Telecom sank 5.2 percent to HK$4.92, its steepest drop in almost 12 months.

The Hang Seng Index rose 5.5 percent this year through yesterday, after positive economic data from the U.S. and China eased concern about the nuclear crisis in Japan and tensions in the Middle East. Shares in the gauge traded at an average 12.8 times forecast earnings yesterday, compared with 14.4 times at the end of last year, according to data compiled by Bloomberg.

“There are number of concerns this week that may be keeping investors on the sideline, like the quarterly results announcement in the U.S. and the upcoming inflation numbers in China,” KGI’s Kwong said.

‘Liquidity Squeeze’

BOC Hong Kong (Holdings) Ltd. dropped 2.4 percent to HK$24.70, while Hang Seng Bank Ltd. (11), the Hong Kong-based lender backed by HSBC Holdings Plc, slid 2.2 percent to HK$122.50 after Barclays Capital warned the city’s lenders are about to face a “significant liquidity squeeze,” which it said means credit is currently “mispriced.”

Separately, Credit Suisse Group AG said lenders will face challenges in attracting new deposits as competition rises and rates climb.

“It is clear that the same rapid pace of credit growth is unsustainable,” Norman Chan, chief executive officer of the Hong Kong Monetary Authority, said in a circular yesterday. Bank credit expanded at an annualized 26 percent in the first two months of 2011 after climbing 29 percent last year, he said.

Hong Kong banks were given until the end of the month to submit their funding strategies to the city’s de facto central bank amid concern that “rapid” credit growth will curb liquidity and reduce loan quality.

Futures on the Hang Seng Index lost 1.6 percent to 23,968. The HSI Volatility Index, the benchmark gauge for Hong Kong stock options, jumped 6 percent to 18.17, indicating options traders expect a swing of 5.2 percent in the Hang Seng Index in the next 30 days.

To contact the reporter on this story: Kana Nishizawa in Tokyo at knishizawa5@bloomberg.net

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

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