Hong Kong stocks (HSI) fell, paring this week’s gain, as France’s borrowing costs rose at a bond auction, adding to concern that Europe’s debt crisis is deepening and tempering gains by Chinese oil producers after a tax cut.
HSBC Holdings Plc (5), Europe’s largest lender by market value, slid 2 percent. China Shanshui Cement Group led declines by producers of the material after a report the country may impose a carbon tax. China Resources Land Ltd. (1109), a state-owned developer, sank 2.4 percent after a report that more cities may impose property taxes. PetroChina Co., Asia’s No. 1 company by market value, gained 2.3 percent after the government raised the threshold for its so-called oil windfall tax.
The Hang Seng Index fell 1.2 percent to 18,593.06 at the close, with more than four stocks declining for each that gained in the 48-member gauge. The benchmark rose 0.9 percent for the week, which was shortened by a holiday. The Hang Seng China Enterprises Index (HSCEI) of mainland companies listed in Hong Kong slid 1.5 percent to 9,987.33.
“The news flow is pretty bearish right now,” said Alex Au, Hong Kong-based managing director of Richland Capital Management Ltd., which oversees $300 million. “No one really wants to increase their risk appetite” with continuing uncertainty about Europe and before Chinese New Year, he said. China’s markets will be closed for the week of Jan. 23.
The Hang Seng Index tumbled 20 percent last year amid concern Europe will fail to contain its debt crisis and China’s monetary tightening will stall global economic growth. Companies in the gauge traded at 9.5 times forecast earnings (HSI) at the close, down from 14.4 times at the beginning of 2011, according to data compiled by Bloomberg. The Standard & Poor’s 500 Index trades at 12.2 times.
HSBC fell 2 percent to HK$59.50, while Hutchison Whampoa Ltd., which owns ports in Germany, Italy and Spain, retreated 2.4 percent to HK$65.25.
In Europe, France sold 7.96 billion euros ($10.2 billion) of debt, with 10-year borrowing costs rising in its first bond auction of the year. Credit rating companies have threatened to cut the nation’s AAA grade.
China Shanshui sank 7.8 percent to HK$4.63, while Anhui Conch Cement Co., China’s biggest producer of the material, declined 5 percent to HK$21.05. China National Building Material Co., a mainland maker of cement and dry wall, dropped 5.8 percent to HK$7.79.
China is considering imposing a stand-alone carbon tax, separate from the environmental carbon dioxide tax, Economic Information Daily reported, citing Su Ming, deputy head of the Ministry of Finance’s research institute for fiscal science.
“There’s some news coming from China that they’re going to charge carbon emission tax, so some sectors are affected, like cement, that emit a lot of carbon,” said Richland’s Au. “Today the only bright spot is the oil sector in China because of the windfall tax reform.”
Fitch Ratings said it expects lower average selling prices for cement in China as supply continues to outstrip demand.
China Resources Land retreated 2.4 percent to HK$12.08 and Guangzhou R&F Properties Co., a developer in the Southern Chinese city, slid 2.3 percent to HK$5.89 after Shanghai Securities News reported Guangzhou and Nanjing may follow Shanghai and Chongqing in imposing property taxes, citing Jia Kang, head of the Finance Ministry’s research institute for fiscal science.
Among stocks that rose, PetroChina gained 2.3 percent to HK$10.62. Cnooc Ltd., China’s No. 1 offshore oil producer, advanced 3 percent to HK$15.08, while China Petroleum & Chemical Corp., known as Sinopec, increased 1.9 percent to HK$8.81. The three stocks gained the most (HSI) in the Hang Seng.
China raised the threshold on a windfall tax paid by crude producers in a move that analysts say may spur exploration of the nation’s energy resources. The level at which the tax would be applied was raised to $55 a barrel from $40 effective Nov. 1, 2011, the oil companies said yesterday.
China Assurance Finance Group Ltd., a credit guarantor, surged 59 percent to 44.5 Hong Kong cents on its debut.
Futures on the Hang Seng Index (HSI) dropped 0.8 percent to 18,650. The HSI Volatility Index (VHSI) rose 4.9 percent to 24.66 today, indicating options traders expect a swing of 7.1 percent in the benchmark over the next 30 days.
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