Hong Kong Stocks Decline as Developers Fall Amid China Concern

Hong Kong stocks fell, with the benchmark Hang Seng Index posting its longest losing streak since December, as developers and automakers dropped amid concern China’s economy is slowing.

Sun Hung Kai Properties Ltd. (16), the world’s No. 1 developer by market value, led a measure of real estate shares lower, declining for a second day after an executive was arrested for alleged bribery. Geely Automobile Holdings Ltd. (175) fell 3 percent on speculation growth in mainland car sales will miss an industry group target. Belle International Holdings Ltd. (1880) advanced 4.7 percent after the shoe retailer posted higher profit on demand from wealthier shoppers.

“Investors are still concerned whether China’s economic grow will slow even more,” said Patrick Yiu, associate director at Cash Asset Management Ltd. in Hong Kong. “Unless property prices move up sharply, I don’t think property shares at the current level are attractive.”

The benchmark Hang Seng Index (HSI) slid 0.2 percent to 20,856.63 at the close in Hong Kong. The gauge fell for a fourth consecutive day, its longest losing streak since Dec. 15. The Hang Seng China Enterprises Index (HSCEI) of mainland companies listed in the city dropped 0.9 percent to 10,776.

Sun Hung Kai slid 1.7 percent to HK$111.10. The shares declined 2.4 percent yesterday after an executive director was arrested by the city’s anti-corruption body as part of an investigation into alleged bribery.

Developers Drop

Property shares fell the most among the four industry groups on the Hang Seng Index. The group surged 24 percent in the first two months of this year, outperforming an 18 percent advance by the benchmark index.

China Resources Land Ltd., a state-owned developer, fell 2.1 percent to HK$12.80 today. Guangzhou R&F Properties Co. (2777) sank 3.1 percent to HK$9.01 after Apple Daily said the developer plans to cut its average selling price by 5 to 10 percent this year. The report cited Co-Chairman Li Szelim.

“Property shares are having a correction after rally in the first two months,” said Cash Asset’s Yiu. “I’m not surprised there’s selling pressure.”

Futures on the Hang Seng Index expiring this month rose 0.1 percent to 20,909. The HSI Volatility Index (VHSI) eased 3.1 percent to 20.86, indicating options traders expect a swing of about 6 percent in the benchmark index over the next 30 days.

The Hang Seng Index has risen 11 percent this year through yesterday amid signs the U.S. economy is improving and amid speculation China will ease monetary policy. Shares in the Hang Seng Index traded at 10.5 times estimated earnings yesterday, compared with 13.5 times for the Standard & Poor’s 500 Index (SPXL1) and 11.2 times for the Stoxx Europe 600 Index.

China Car Sales

Carmakers dropped today after an official at the China Association of Automobile Manufacturers yesterday said mainland vehicle sales will probably miss their 8 percent growth forecast this year. A slowing economy and rising fuel costs will limit demand, the official said.

Geely Automotive dropped 3 percent to HK$2.88. Brilliance China Automotive Holdings Ltd., a partner of Bayerische Motoren Werke AG, retreated 1.3 percent to HK$8.28. BYD Co., the mainland carmaker partly owned by Warren Buffett’s Berkshire Hathaway Inc., fell 3.1 percent to HK$20.55.

Futures on the Standard & Poor’s 500 Index rose 0.3 percent today. The gauge fell 0.3 percent in New York yesterday after China raised fuel prices for the second time in less than six weeks.

Among stocks that rose today in Hong Kong, Belle International Holdings advanced 4.7 percent to HK$14.18 after saying profit rose by 24 percent last year on demand from wealthier shoppers. China’s largest retailer of women’s shoes also said it would buy rival Big Step Ltd.

“Economic growth in China is still intact, and corporate earnings are healthy,” said Cash Asset’s Yiu. “Investors are still trying to buy good quality stocks.”

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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