Hong Kong stocks (HSI) fell, with the benchmark index set to snap a two-day rally, after Standard & Poor’s downgraded credit ratings for lenders including Bank of America Corp., Goldman Sachs Group Inc. and Citigroup Inc.
HSBC Holdings Plc (HSBA) fell 2.1 percent after S&P also cut Europe’s biggest lender to A+ from AA-. Bank of China Ltd. (3988) and China Construction Bank Corp. (939) slid in Hong Kong, even after S&P upgraded both, giving them higher grades than most of their largest U.S. counterparts. Ping An Insurance (Group) Co., China’s second-biggest insurer, sank 5.3 percent after getting a warning letter from the industry regulator.
The Hang Seng Index fell 1.5 percent to 17,989.35 at the 4 p.m. close in Hong Kong, extending this month’s decline to 9.4 percent. Almost five stocks fell for each that rose in the 46- member index. The Hang Seng China Enterprises Index (HSCEI) of mainland companies listed in Hong Kong slipped 2.1 percent to 9,508.94. The gauge has lost 9.6 percent this month.
“The rating cuts may have a negative impact on investor sentiment,” said Koji Toda, chief fund manager at Resona Bank Ltd. in Tokyo. “What investors are really paying attention to is whether policy makers are going to take steps to resolve the European debt situation.”
Bank of America, Goldman Sachs and Citigroup had their long-term credit grades reduced to A- from A by S&P after the ratings firm revised criteria for dozens of the largest global lenders. It made the same cut to Morgan Stanley and Bank of America’s Merrill Lynch unit. JPMorgan Chase & Co. was reduced one level to A from A+.
Financial firms were the biggest drag on the Hang Seng Index. HSBC dropped 1.5 percent to HK$57.45. Standard Chartered Plc (STAN), the U.K. lender that gets more than half of revenue in the Asia Pacific, slid 1.6 percent to HK$159.40.
Chinese banks fell even after Bank of China and China Construction Bank were raised to A from A- and S&P maintained its A rating on Industrial and Commercial Bank of China Ltd., giving all three lenders higher grades than most big U.S. banks.
Bank of China lost 1.6 percent to HK$2.41, and China Construction Bank slid 0.8 percent to HK$5.26. Industrial and Commercial Bank dropped 2.3 percent to HK$4.31.
Ping An sank 5.3 percent to HK$51.15. The China Securities Regulatory Commission issued a warning letter to Ping An Securities Co. in regard to the initial public offering of Hunan Shengjingshanhe Bio Technology Co., the Shanghai Securities Journal reported today. Sheng Ruisheng, a Ping An spokesman, confirmed the letter had been issued, without giving details of its contents.
In Europe, the region’s effort to expand its bailout fund is falling short, forcing euro-area finance ministers to consider greater roles for the International Monetary Fund and the European Central Bank to insulate Spain and Italy from the debt crisis.
The Hang Seng Index has tumbled 22 percent this year amid concern China will not ease monetary policy further and Europe’s debt crisis is worsening. Companies in the index traded at 9.8 times estimated earnings, down from 14.4 times on Dec. 31, according to Bloomberg data. (HSCI) The Standard & Poor’s 500 Index trades at 12.1 times.
Yanzhou Coal Mining Co. slid 4.6 percent to HK$17.38 after BOC International analyst Lawrence Lau yesterday cut his rating on the company and lowered earnings forecasts to reflect a lower-than-expected contract price of hard coking coal.
CST Mining Group Ltd. (985), a copper producer, slumped 18 percent to 8.2 Hong Kong cents. Glencore International Plc, the biggest publicly traded commodities trader, ended a proposal to buy a majority stake in the Hong Kong-based company’s copper project in Peru for $475 million.
China Pharmaceutical Group Ltd. (1093) sank 9.7 percent to HK$1.86 after saying earnings in the fourth quarter will “further worsen” after reporting net income tumbled 52 percent in the nine months ended September.
Of the 56 companies on the Hang Seng Composite Index that reported results since Oct. 11, 20 missed analysts’ estimates, while 10 surpassed expectations, data compiled by Bloomberg News showed.
Futures on the Hang Seng Index slid 0.1 percent to 18,082. The HSI Volatility Index added 0.8 percent to 30.88, indicating options traders expect a swing of 8.9 percent in the benchmark index over the next 30 days.
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