Hong Kong Stocks Fall as Europe Withholds Aid Package for Greece

Hong Kong stocks fell, paring this week’s advance, as European finance ministers held back a rescue package for debt-laden Greece, fueling concern the nation may exit the euro. Banks declined.

Cosco Pacific Ltd. (1199), which operates ports in Greece, sank 2.4 percent. Bank of Communications Co., part owned by HSBC Holdings Plc, slid 5.1 percent, leading a measure of lenders lower after a report its chairman said the nation’s banks face pressure on deposit growth. CSR Corp., China’s biggest trainmaker, retreated 4.5 percent after Citigroup Inc. said investors should take profit after its rally.

The Hang Seng Index slid 1.1 percent to 20,783.86 at the close, paring this week’s advance to 0.1 percent. The Hang Seng China Enterprises Index (HSCEI) of mainland companies listed in Hong Kong fell 2.3 percent to 11,405.22 after China’s exports dropped in January for the first time in more than two years. Overseas shipments slid 0.5 percent from a year earlier, while imports sank 15.3 percent, the customs bureau said today.

Europe remains “the wild card,” said Catherine Yeung, Hong Kong-based investment director at Fidelity Investment Management Ltd., which oversees $207.9 billion. “We will see a bit of volatility because we haven’t fully seen the risk- appetite trade come back.”

The Hang Seng Index extended it longest weekly winning streak since October 2010. Shares rose the past six weeks as positive U.S. economic reports boosted optimism global demand will grow. Companies in the gauge traded at 10.5 times forecast earnings, down from 14.4 times at the beginning of 2011, according to data compiled by Bloomberg. The Standard & Poor’s 500 Index traded at 12.9 times.

U.S. Futures

Futures on the Standard & Poor’s 500 Index fell 0.5 percent today. The benchmark gauge advanced 0.2 percent in New York yesterday as Greek political leaders said they had struck a deal on a package of austerity measures needed to secure international rescue funds.

Asian stocks fell today after European finance ministers held back on the rescue package for Greece in a rebuff that left lawmakers in Athens under government pressure to endorse a newly minted austerity plan or exit the euro.

Luxembourg Prime Minister Jean-Claude Juncker said Greece must pass its latest austerity package into law and identify 325 million euros ($431 million) in spending cuts before euro-area governments endorse a second bailout for the country.

Cosco Pacific slid 2.4 percent to HK$12.10, while Hutchison Whampoa Ltd., which owns ports in Germany, Italy and Spain, sank 1 percent to HK$76.05.

‘Fine Tuning Needed’

“There still needs to be fine-tuning process for a Greece package,” said Chu Moon Sung, a Seoul-based fund manager at Shinhan BNP Paribas Asset Management Co., which oversees $28 billion. “Investors are taking a breather following the recent solid rally.”

Bank of Communications declined 5.1 percent to HK$5.99, the biggest drop in the Hang Seng Index. (HSI) China’s banking industry faces pressure on deposit growth and liquidity will be “relatively tight” this year, Financial News reported Chairman Hu Huaibang as saying.

The International Financing Review reported yesterday Bank of Communications plans to raise about 50 billion yuan ($7.95 billion) through a private placement of Hong Kong-listed shares, citing two unidentified people. The lender said reports about its fundraising plan did not come from the company.

A measure of financial companies had the biggest decline among the Hang Seng Index’s four industry groups. Industrial & Commercial Bank of China Ltd. the mainland’s biggest lender, slid 2.4 percent to HK$5.33. Agricultural Bank of China Ltd., the nation’s third-biggest lender by market value, retreated 3.4 percent to HK$3.74.

Railway Firms Slide

CSR sank 4.5 percent to HK$5.54 after Citigroup recommended taking profits on the shares before its “likely disappointing new orders announcement.” China’s railway equipment industry has rallied on stronger rail investment, and the shares could slide on realization that 2012 train deliveries is weak, Citigroup analysts Paul Gong and Jenny Zhen wrote in a report dated yesterday. The stock jumped 31 percent this year through yesterday.

China Railway Construction Corp. (1186), a builder of the nation’s rail links, slid 4.9 percent to HK$5.78, and China Railway Group Ltd. sank 2.6 percent to HK$3.05.

Perfect Shape PRC Holdings Ltd. (1830), a slimming treatment provider, climbed 1.1 percent to 89 Hong Kong cents on its first day of trading.

Futures on the Hang Seng Index slid 0.8 percent to 20,795 today. The HSI Volatility Index (VHSI) rose 3.7 percent to 23.56, indicating options traders expect a swing of 6.8 percent in the benchmark over the next 30 days.

To contact the reporter on this story: Kana Nishizawa in Hong Kong at knishizawa5@bloomberg.net.

To contact the editor responsible for this story: Nick Gentle at ngentle2@bloomberg.net

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