Hong Kong stocks fell, with the city’s benchmark index falling the most in almost seven weeks, after China Mobile (941) Ltd. missed profit estimates and a report signaled mainland manufacturing may shrink for a sixth month.
China Mobile slid 3 percent after higher costs to attract customers ate into earnings at the world’s biggest phone company by users. China National Materials Co. slumped 4.4 percent after the manufacturer of cement-making equipment said it may post a first-quarter loss. Mainland refiner China Petroleum & Chemical Corp. (600028) slid 1.9 percent after China National Radio reported the government may cut fuel prices next month as the slowing economy reduces demand.
The Hang Seng Index slid 1.8 percent to 20,624.39 at the close, its steepest drop since March 6. All but three stocks declined in the 48-member gauge. Volume on was 22 percent below the 30-day intraday average. The Hang Seng China Enterprises Index (HSCEI) of mainland companies fell 2.2 percent to 10,810.48.
“With a lot of companies issuing profit warnings, it’s making investors cautious,” said Francis Lun, managing director at Hong Kong-based Lyncean Holdings Ltd. “China’s economy is slowing, and that has a direct impact on corporate earnings.”
The Hang Seng Index has fallen about 4.9 percent from this year’s peak on Feb. 29 as China targeted the slowest economic growth since 2005 and amid speculation the gauge had risen too fast after an 18 percent advance in the first two months of the year. Companies on the index trade at an average of 10.4 times estimated earnings, up from 10 times on Dec. 30 according to data compiled by Bloomberg. The Standard & Poor’s 500 Index trades at 13.1 times.
Futures on the Hang Seng Index (HSI) retreated 2 percent to 20,568. The HSI Volatility Index rose 6.7 percent to 20.50, indicating options traders expect a swing of 5.9 percent in the benchmark over the next 30 days.
Stocks fell today after a report from HSBC Holdings Plc and Markit showed China’s manufacturing may contract for a sixth month in April. The Purchasing Managers’ Index rose to 49.1 from 48.3 in March and was below the 50 threshold that signals growth.
China Mobile dropped 3 percent to HK$84.80, the second-biggest drag on the Hang Seng Index, after posting first-quarter profit of 27.8 billion yuan ($4.4 billion), missing the 28.2 billion yuan median estimate of four analysts surveyed by Bloomberg News. Margins fell as the carrier increased spending to draw new customers amid tighter competition, it said.
China National Materials declined 4.4 percent to HK$3.06 after saying it may swing to a loss in the three months through March on falling prices and sales. The company issued the profit warning after the close of markets on April 20.
Changan Minsheng APLL Logistics Co., a supply-chain management company, slid 10 percent to HK$5.73, a six-month low. Profit probably fell in the first quarter as production and sales declined among customers in the auto industry, it said in a statement that didn’t provide figures.
Ten of the 19 companies listed in Hong Kong that reported quarterly earnings so far this month posted lower profits than last year, according to data compiled by Bloomberg.
China Petroleum & Chemical slumped 1.9 percent to HK$8.14, while PetroChina Co., a Beijing-based refiner, declined 1.8 percent to HK$11.20. China may cut gasoline and diesel prices next month, China National Radio reported yesterday, citing Zhang Bin, an analyst at researcher Chem99.com.
Dongyue Group (189), a chemicals maker, slumped 11 percent to HK$6.61 as it resumed trading after being suspended on April 19. Dongyue said it hasn’t reached an agreement on the terms of share and bond sales.
Among stocks that advanced, Tencent Holdings Ltd. (700) rose 1.1 percent to HK$236.60 after Bank of Communications Co. said the popularity of one the online company’s new games is growing faster than rivals’ offerings. An increase in Internet searches for the new game suggests growing customer interest, said Connie Gu, an analyst at Bank of Communications. Tencent had the biggest gain on the Hang Seng Index today.
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