Hong Kong stocks fell for the first time in three days as mainland companies dropped after a report signaled factory output in China may fall this month, crimping the earnings outlook for manufacturers.
Anhui Conch Cement Co., a mainland maker of the building material, sank 1.8 percent after China’s banking regulator said it will step up oversight of local government and property lending. Cnooc Ltd. (883), China’s biggest offshore oil producer by market value, dropped 3.6 percent, extending yesterday’s decline after agreeing to buy a bankrupt Canadian oil-sands producer. Europe-related shares gained after France and Germany agreed on a joint position to address Greece’s debt crisis.
“I’m quite disappointed with the manufacturing data,” said Danny Yan, a fund manager at Haitong International Asset Management, which oversees $600 million. “But I think this is a seasonal thing and I’ll be surprised if this happens two months in a row. It had a short-term impact on the market, but in the longer-term, there will be more analysis on the data” for more concrete market reaction.
The Hang Seng Index fell 0.1 percent to 21,987.29 at the close, after dropping as much as 0.7 percent and rising as much as 0.4 percent. The Hang Seng China Enterprises Index of Chinese companies’ H shares retreated 0.5 percent to 12,322.25.
Developers and makers of construction materials dropped after China’s banking commission said it will strengthen its oversight of property lending in second- and third-tier cities, a move that could limit building. Banks should also control the risks of new loans tied to financing vehicles through “strategic cooperation” with local governments, the regulator said on its website yesterday.
Anhui Conch slid 1.8 percent to HK$38.80. China National Building Material Co., a Beijing-based maker of cement and fiberglass, dropped 2.7 percent to HK$16. Guangzhou R&F Properties Co., the biggest developer in the Southern Chinese city, retreated 1.2 percent to HK$10.08.
Shares of manufactures slipped after preliminary data from a purchasing managers’ index indicated China’s manufacturing may contract for the first time in a year in July. The gauge fell to 48.9 compared with a final reading of 50.1 in June, according to HSBC Holdings Plc (5) and Markit Economics. Fifty is the dividing line between expansion and contraction. The final July reading is due on Aug. 1.
Jiangxi Copper Co., China’s No. 1 producer of the metal by market value, dropped 2.4 percent to HK$26.95. Aluminum Corp. of China Ltd., the nation’s biggest producer of the lightweight metal by market value, sank 1.5 percent to HK$6.12.
Changfeng Axle China Co. (1039), an automotive parts maker, tumbled 24 percent to HK$2.39 after saying it expects its first- half profit to decrease, citing a decline in sales.
The decline in manufacturing “implies that June’s rebound in industrial production was just temporary,” Qu Hongbin, chief China economist at HSBC in Hong Kong, said in a statement. “We expect industrial growth to decelerate in the coming months as tightening measures continue to filter through.”
Cnooc sank 3.6 percent to HK$16.86, the steepest drop and the biggest drag on the Hang Seng Index. (HSI) The company will spend $2.1 billion in cash and debt to buy Opti Canada Inc., Opti said in a statement yesterday. Shares also dropped yesterday after Nomura Holdings Inc. cut its rating on the stock to “neutral” from “buy,” citing interruption to its production volumes.
The Hang Seng Index has dropped 4.6 percent this year amid concern Europe’s debt crisis is spreading and the U.S. may default on its debt. Shares on the index traded at 11.8 times forecast earnings, compared with about 14.4 times at the end of 2010, according to data compiled by Bloomberg.
Among stocks that rose, HSBC Holdings Plc (HSBA), Europe’s second- largest bank by total assets, rose 0.9 percent to HK$75.90, while Standard Chartered Plc (2888), the U.K.’s third-biggest bank by market value, increased 0.8 percent to HK$199.70. Esprit Ltd., a clothier that gets most of its revenue from Europe, advanced 3.9 percent to HK$22.95.
German Chancellor Angela Merkel and French President Nicolas Sarkozy agreed on a joint position to solve Greece’s debt crisis on the eve of a summit convened to stamp out contagion in European bond markets.
Details will be released today when euro region leaders meet in Brussels, the governments said in a statement after seven hours of talks in Merkel’s Chancellery in Berlin.
Futures on the Hang Seng Index fell 0.1 percent to 21,959. The HSI Volatility Index, the benchmark gauge for Hong Kong stock options, sank 4 percent to 19.23, indicating options traders expect a swing of 5.5 percent in the Hang Seng Index in the next 30 days.
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