Hong Kong Stocks Slide as China Says No Change to Policy

Most Hong Kong stocks fell after China’s central bank governor said recent cuts to reserve ratios didn’t signal a change in monetary policy even as the country reported its biggest trade deficit in 22 years.

Foxconn International Holdings Ltd. (2038), a maker of mobile phones that depends on Europe for a quarter of its operating profit, dropped 3.6 percent after China’s export growth slowed amid the euro region’s debt crisis. China Railway Construction Corp. plunged 7.3 percent after the Xinhua News Agency said a section of high-speed track built by the company collapsed in heavy rain. China Mobile Ltd. rose 3.9 percent after brokerages recommended shares of the carrier.

“China’s government needs to do something to beef up the economy,” said Alex Au, Hong Kong-based managing director of Richland Capital Management Ltd., which oversees $300 million. “Investors will start to expect more from the government.”

The Hang Seng Index (HSI) gained 0.2 percent to close at 21,134.18, erasing losses in the last 15 minutes of trading. Trading volume on the gauge was 35 percent less than its 30-day average, according to data compiled by Bloomberg. About two stocks declined for each that rose on the broader Hang Seng Composite Index.

The Hang Seng China Enterprises Index of mainland companies, also known as the H-share index, dropped 0.3 percent to 11,225.91.

The Hang Seng Index has risen 14 percent this year, boosting the price of shares on the gauge to 10.7 times estimated earnings. That compares with 13.1 times for the Standard & Poor’s 500 Index and 11 times for the Stoxx Europe 600 Index.

Zhou Xiaochuan

Futures on the Hang Seng expiring this month gained 0.3 percent to 21,124. The HSI Volatility Index slumped 1.1 percent to 21.14, indicating options traders expect a swing of 6.1 percent in the benchmark index over the next 30 days.

Stocks slipped today after People’s Bank of China Governor Zhou Xiaochuan said last month’s cut in the reserve-requirement ratio isn’t a signal of loosening monetary policy. The central bank in February lowered the amount of money mainland banks have to keep in reserve for only the second time since 2008.

China on March 10 reported its largest trade deficit since at least 1989 last month as Europe’s sovereign-debt turmoil damped exports and imports rebounded after a weeklong lunar New Year holiday.

Track Collapse

Foxconn International, which makes handsets for Nokia OYJ, slumped 3.6 percent to HK$5.59. Li & Fung Ltd. (494), which exports toys and clothes to U.S.-based Wal-Mart Stores Inc., fell 1.5 percent to HK$17.50.

China Railway Construction led railroad stocks lower after Xinhua News said a 300-meter (1,000-foot) section of track built by the company collapsed in central China’s Hubei province following heavy rains. The company, builder of more than half the country’s routes, plunged 7.3 percent to HK$5.31, dropping the most this year.

China Railway Group Ltd. (601390) fell 5.4 percent to HK$2.83 on speculation the incident may deter the government from pushing ahead with a 2.8 trillion yuan ($443 billion) building plan. Construction was slowed last year after 40 people were killed in a high-speed crash near Wenzhou in July.

China Mobile Ltd. (941), the world’s biggest phone carrier by users, gained 3.9 percent to HK$87.45 after Credit Suisse Group AG and HSBC Holdings Plc recommended buying the shares. Goldman Sachs Group Inc. last week boosted the company’s price target to HK$95 from HK$84, citing an improving smartphone business, high dividends and development of a fourth-generation network.

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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