Hong Kong stocks (HSI) fell as Premier Wen Jiabao said China faces “relatively difficult” business conditions, tempering gains by exporters on better-than- estimated economic data from the U.S. and Germany.
Swire Pacific Ltd. (19), the Hong Kong developer, retailer and airline operator, led declines, dropping 14 percent as it spins off its property unit. Agile Property Holdings Ltd., a developer of properties in mainland China, fell 6.5 percent. Li & Fung Ltd., the biggest supplier to Wal-Mart Stores Inc., climbed 0.7 percent as U.S. manufacturing increased and German unemployment unexpectedly fell.
The Hang Seng Index fell 0.8 percent to 18,727.31 at the 4 p.m. close. More than two stocks fell for each that rose in the 48-member gauge. The Hang Seng China Enterprises Index (HSCEI) of mainland companies’ H shares fell 1.4 percent to 10,094.41.
The Hang Seng Index fell 20 percent in 2011 as China raised interest rates and lenders’ reserve requirements to curb inflation and slow the advance of property prices.
“Investors are concerned about liquidity in the market and this adds to worries about the economic slowdown after Wen’s comments,” said Chen Liqiu, a strategist at Jianghai Securities Co. in Shanghai. “We need reserve-ratio cuts for the liquidity issue to be eased.”
Companies in the Hang Seng Index (HSI), which climbed 2.4 percent on the first trading day of the new year yesterday, traded at 9.4 times forecast earnings (HSI), down from 14.4 times at the end of 2010, according to data compiled by Bloomberg. The Standard & Poor’s 500 Index traded at 12.1 times.
Wen said business conditions may be “relatively difficult” this quarter and monetary policy will be fine-tuned as needed. The government seeks to stabilize growth and consumer prices to “promote social harmony,” he said during a two-day trip to Hunan province, according to a statement on the government’s website yesterday.
China’s money supply has “structural issues” and one can’t simply say that there is too much or too little lending or liquidity, Wen said. The government will tighten or loosen policies according to the needs of different industries, he said.
Agile Property dropped 6.5 percent to HK$6.57. Anhui Conch Cement Co. (914), China’s biggest maker of the key building material by sales, fell 4.4 percent to HK$22.60. China Shenhua Energy Co., a coal producer, slipped 2.3 percent to HK$34.10.
Futures on the S&P 500 (SPXL1) declined 0.2 percent today. The index rose 1.6 percent in New York yesterday as manufacturing across the globe showed improvement in December, suggesting production is weathering strains from Europe’s debt crisis.
A report showed U.S. factory activity grew at the fastest pace in six months. Australian manufacturing expanded for the first time in six months, while similar Chinese and German data beat economist estimates.
Li & Fung rose 0.7 percent to HK$15.34. China Cosco Holdings Co., a shipping company, climbed 1.8 percent to HK$3.99. China Merchants Holdings International Co., an investor in mainland ports, added 1.7 percent to HK$24.
Futures on the Hang Seng Index fell 0.2 percent to 18,771. The HSI Volatility Index (VHSI) retreated 2 percent to 24.42, indicating options traders expect a swing of 7 percent in the benchmark over the next 30 days.
Swire Pacific, the biggest commercial landlord in Hong Kong’s Island East district, slid the most since 1997 as the shares began trading ex-dividend and after UBS AG said the company may be valued differently by investors after the proposed spinoff of its property unit. The shares tumbled 14 percent to HK$80.35.
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