Hong Kong Stocks Fall as Developers Drop on Earnings, Controls

Hong Kong stocks fell amid lower- than-average trading volume as China Overseas Land & Investment Ltd. led developers lower on slower earnings growth and speculation China will keep controls on the property market.

China Overseas Land slid 4.7 percent, with a gauge of real- estate companies falling the most on the Hang Seng Index. China Mobile Ltd. (941) dropped 1.1 percent after Nomura Holdings Inc. cut the phone company’s investment rating and said dividends may disappoint. Li & Fung Ltd. (494) advanced after U.S. jobless claims fell and Goldman Sachs Group Inc. added the Wal-Mart Stores Inc. supplier to a list of top stocks.

The Hang Seng Index slid 0.2 percent to 21,317.85 at the close in Hong Kong. For the week, the index gained 1.1 percent. The Hang Seng China Enterprises Index (HSCEI) of mainland companies listed in the city slid 0.2 percent to 11,216.39 today, falling for a third day after Chinese Premier Wen Jiabao said home prices are still too high.

“With Premier Wen still emphasizing the regulation of the property sector, investors are remaining quite cautious,” said Ben Kwong, chief operating officer at KGI Asia Ltd., a Hong Kong-based brokerage. “Buying interests are still focused on export-oriented companies on the strength of the U.S. economy.”

The Hang Seng Index has risen 16 percent this year as U.S. data signaled strength in the world’s biggest economy and amid speculation China will ease monetary policy. Shares in the Hang Seng Index traded at 10.8 times estimated earnings at the last close, compared with 13.4 times for the Standard & Poor’s 500 Index and 11.3 times for the Stoxx Europe 600 Index.

China Overseas Drops

China Overseas Land fell 4.7 percent to HK$14.64 today, leading a measure of property shares lower. The developer yesterday said 2011 profit growth slowed as the Chinese government introduced measures to cool the property market.

China Mobile slid 1.1 percent to HK$83.75 after Nomura cut its rating on the stock to “neutral” from “buy.”

Li Ka-shing, Hong Kong’s richest man, said he won’t withdraw his money from the city even if the candidate he supports to lead the government loses an election on March 25. Li said he will vote for Henry Tang, even as the candidate’s popularity has plummeted after a series of personal scandals.

Cheung Kong (Holdings) Ltd. (1), the developer controlled by Li, slid 0.3 percent to HK$109.20. Hutchison Whampoa Ltd., another Li company, added 0.7 percent to HK$81.45. Power Assets Holdings Ltd., also part-owned by the man ranked 14th on the Bloomberg Billionaires Index, added 0.3 percent to HK$58.30.

U.S. Shoppers

Futures on the S&P 500 Index (SPXL1) slid 0.1 percent today after the measure gained 0.6 percent in New York yesterday, rising above 1,400 for the first time in almost four years. Manufacturing (EMPRGBCI) in the New York region expanded in March at the fastest pace since June 2010 and claims for jobless benefits fell last week, matching the lowest level since 2008.

Li & Fung, which makes 65 percent of its revenue in the U.S., rose 2.7 percent to HK$19.10. Goldman Sachs Group Inc. raised its rating on the supplier of toys and clothes to buy from neutral and added it to a list of top stocks. The company may benefit as U.S. retailers rebuild inventory to meet surprisingly firm demand from shoppers, it said.

Galaxy Entertainment Group Ltd. surged 6.6 percent to HK$20.10, leading its peers higher after Nomura Holdings Inc. recommended investors buy shares of the Macau casino operator.

Futures on the Hang Seng Index (HSI) expiring this month gained 0.1 percent to 21,339. The HSI Volatility Index (VHSI) eased 2.5 percent to 19.77, indicating options traders expect a swing of about 5.7 percent in the benchmark index over the next 30 days.

“The Hong Kong market is moving pretty much sideways without clear direction,” said KGI’s Kwong. “At this level, the market needs further stimulus to go even higher. It lacks further upward momentum.”

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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