Hong Kong Stocks Slide as China Earnings Miss Estimates

Hong Kong stocks dropped, with a gauge of mainland shares falling for a 10th time in 11 days, as Jiangxi Copper Co. and Gome Electrical Appliances Holding Ltd. missed profit estimates and Societe Generale SA said earnings at Chinese companies listed in the city won’t grow this year.

Jiangxi Copper, China’s biggest producer of the metal, dropped 2.4 percent after second-half profit missed analysts’ estimates. Gome Electrical tumbled 21 percent after earnings fell at the nation’s second-largest electronics retailer. Li & Fung Ltd. (494), a supplier of clothes and toys to Wal-Mart Stores Inc., slid 5.2 percent on a plan to sell shares at a discount.

“We’re seeing a modest correction following recent gains,” said Yoji Takeda, who oversees about $1.1 billion at RBC Investment Management (Asia) Ltd. in Hong Kong. “We’ve seen some negative earnings, but overall the economy is still growing at a healthy speed, so I’m not too worried.”

The Hang Seng Index declined 0.8 percent to 20,885.42 at the 4 p.m. close in Hong Kong. The gauge climbed to its highest level since March 19 yesterday after Federal Reserve Chairman Ben S. Bernanke said the U.S. recovery isn’t assured and signaled he will continue to stimulate the economy. Volume on the index today was about 6.4 percent lower than the 30-day moving average, according to data compiled by Bloomberg.

The Hang Seng China Enterprises Index (HSCEI) of mainland companies dropped 1 percent to 10,701.37. Societe Generale said firms on the gauge wouldn’t be able to increase profits this year, cutting a previous forecast for 5 percent growth.

‘Surprisingly Weak’

“Consensus earnings expectations for the Hang Seng China Enterprises Index for 2012 are far too optimistic,” Societe Generale strategists Guy Stear and Anthony Lee wrote in report dated yesterday.

Profit at Chinese industrial companies dropped 5.2 percent in January and February, the first decline since 2009, the National Bureau of Statistics said on its website yesterday. Earnings rose 34 percent in the first two months of last year.

Jiangxi Copper fell 2.4 percent to HK$18.30 today. Profit fell to 2.27 billion yuan ($360 million) in the six months ended Dec. 31, compared with 2.79 billion yuan a year earlier, according to Bloomberg calculations based on full-year earnings announced yesterday. The result trailed the 3.04 billion yuan median estimate of 15 analysts surveyed by Bloomberg.

Angang Steel Co. slid 2.2 percent to HK$4.88 after the biggest Hong Kong-traded steelmaker reported a wider second-half loss because of waning demand and high raw-material costs.

Earnings Performance

Of the 239 companies that reported annual net income on the Hang Seng Composite Index since Jan. 9, 52 percent missed analysts’ estimates, according to data compiled by Bloomberg.

Gome Electrical slumped 21 percent to HK$1.64, the biggest decline since September 30. Net income at the company dropped 6 percent to 1.84 billion yuan last year, missing the 2.42 billion yuan mean estimate of 10 analysts surveyed by Bloomberg News.

Samsonite International SA slipped 1.1 percent to HK$13.96 after the world’s largest branded-luggage maker forecast slower sales growth in Asia this year.

Futures on the Standard & Poor’s 500 Index (SPX) were little changed today. The gauge dropped 0.3 percent in New York yesterday even as a key index of U.S. consumer confidence held close to the highest level in a year, and a measure of property values in 20 cities fell at a slower pace in January.

Bernanke ‘Cautious’

“The recent news has been good,” Bernanke said, according to a transcript of an interview with ABC News anchor Diane Sawyer provided by the network. “But I think we need to be cautious and make sure this is sustainable. And -- we haven’t quite yet got to the point where we can be completely confident that we’re on a track to full recovery.”

Exporters dropped. Techtronic Industries Co. (669), a power-tool maker that counts North America as its largest market, declined 3.9 percent to HK$10.32. Li & Fung, which gets 65 percent of sales from the U.S., slipped 5.2 percent to HK$18.58.

Shares also fell after the Wal-Mart supplier said it plans to sell 210 million shares at a 5 percent discount to yesterday’s closing price. Li & Fung said it plans to raise HK$3.9 billion ($502 million) in its biggest stock sale since its initial public offering in 1992 to help fund acquisitions.

The Hang Seng Index climbed about 14 percent this year through yesterday as signs the U.S. economy is recovering fueled confidence in the outlook for exports. The rally boosted the value of stocks on the gauge to 10.6 times estimated earnings. That compares with 13.5 times for the S&P 500 and 11.2 times for the Stoxx Europe 600 Index.

Futures on the Hang Seng Index (HSI) expiring this month fell 1.2 percent to 20,902. The HSI Volatility Index was little changed at 18.87, indicating options traders expect a swing of about 5.4 percent in the benchmark index over the next 30 days.

To contact the reporter on this story: Jonathan Burgos in Singapore at jburgos4@bloomberg.net

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

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