Hong Kong Stocks Fall as Fed Signals Slower Growth; ICBC Drops
Hong Kong stocks fell, led by financial stocks, after the Federal Reserve lowered its forecast for economic growth in the world’s biggest economy and on concern China will take further steps to curb inflation.
Industrial & Commercial Bank of China (601398) Ltd., Asia’s largest bank by market capital, declined 1.4 percent. Li & Fung Ltd. (494), which supplies products to Wal-Mart Stores Inc., gained for a fourth day, rising 2.4 percent, after the company’s investment rating was boosted by Samsung Securities Co. Belle International Holdings Ltd. (1880), which sells women’s shoes in China, dropped 2.4 percent. Sihuan Pharmaceutical Holdings Group Ltd. fell 4.4 percent after announcing an acquisition plan.
“People are looking for where they can put their bets for the second-half and there doesn’t seem to be many choices,” said Pearlyn Wong, an investment analyst in Singapore at Bank Julius Baer & Co., which manages about $205 billion in client assets. “With interest rate hikes and tightening, we can’t really expect much growth until 2012. Until then, we’re just in limbo.”
The Hang Seng Index (HSI) fell 0.5 percent to 21,759.14 at the close of trading. The index rose as much as 0.2 percent in the afternoon trading session. About as many shares gained as fell on the 46 member measure. The gauge last week entered a so- called correction, tumbling more than 10 percent from its April high, on mounting concern Greece will default on its debt and slow global economic growth.
Financial Shares Drag
The Hang Seng China Enterprises Index of Chinese companies’ H shares slid 0.7 percent to 12,066.52.
A gauge of financial shares was the biggest drag on the Hang Seng index today, losing 0.9 percent. Industrial & Commercial Bank sank 1.4 percent to HK$5.72. China Construction Bank Corp. (939), Asia’s second-largest bank by market value, slumped 2 percent to HK$6.27. HSBC Holdings Plc, Europe’s biggest bank by market capitalization, fell 0.9 percent to HK$75.90.
Fed officials lowered their forecasts for growth and employment this year and next, projecting the economy will expand 2.7 percent to 2.9 percent this year, down from forecasts ranging from 3.1 percent to 3.3 percent in April.
“The economic recovery is continuing at a moderate pace, though somewhat more slowly than the committee had expected,” the Federal Open Market Committee said yesterday in a statement. “The Committee will complete its purchases of $600 billion of longer-term Treasury securities by the end of this month and will maintain its existing policy of reinvesting principal payments from its securities holdings.”
Debt, Meltdowns, Tightening
The Hang Seng Index fell 5.5 percent this year on concern Greece’s debt, Japan’s nuclear crisis and China’s monetary- policy tightening will hamper the global economic recovery. Shares in the gauge traded at 11.8 times forecast earnings on average, the lowest level since March 2009, according to data compiled by Bloomberg.
Li & Fung advanced 2.4 percent to HK$15.96, the third- biggest increase on the Hang Seng index. The shares were boosted to “buy” from “sell” at Samsung, and increased to “buy” from “hold” at Deutsche Bank AG. The company plans to grow through acquiring other businesses, Deputy Chairman William Fung said in an interview with Bloomberg TV today. Yesterday the stock rose after Li & Fung said its business supplying Wal-Mart will expand and may be profitable as early as this year.
Belle International declined 2.4 percent to HK$15.30. China Yurun Food Group Ltd., which supplies meat products, slid 4.4 percent to HK$27.05. New World Department Store China, a department store operator that receives all its revenue from China, declined 1 percent to HK$5.96.
The China Securities Journal said in a front-page editorial the country’s central bank should boost real interest rates, a move that would cool the nation’s lending market.
Sihuan Pharmaceutical Holdings Group Ltd. (460), a maker of cardio-cerebral vascular drugs in China, fell 4.4 percent to HK$3.48, its lowest close since listing in October. The company agreed to buy three drugmakers in China for 775 million yuan to broaden its product lines and sales network.
Other stocks that rose include Greenheart Group Ltd., which surged 16 percent to HK$1.18 after shares of its controlling shareholder, Sino-Forest Corp., jumped 51 percent in Toronto, Canada.
Among other shares that declined, China Railway Group Ltd. (390) dropped 1.7 percent to HK$3.43 after a manufacturing gauge signaled slowing expansion. China Communications Construction Co., which manages transportation infrastructure, slipped 0.9 percent to HK$6.64. China Shipping Development Co., which ships oil and coal, fell 0.9 percent to HK$6.93.
The preliminary purchasing managers’ index compiled by HSBC Holdings Plc (HSBA) and Markit Economics dropped to 50.1 in June from a final reading of 51.6 in May. A number above 50 indicates expansion.
Futures on the Hang Seng Index fell 0.7 percent to 21,684. The HSI Volatility Index, the benchmark gauge for Hong Kong stock options, advanced 2.8 percent to 21.04, indicating options traders expect a swing of 6 percent in the Hang Seng Index in the next 30 days.
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