Hong Kong Stocks Fall, Cap Fourth Week Loss, on China PMI

Hong Kong stocks fell as China’s manufacturing grew at the weakest pace since December and home prices fell to a 16-month low, adding to concern that the slowdown in the world’s second largest economy is deepening. The Hang Seng Index capped its fourth straight week of losses, the longest such streak since November.

Citic Pacific Ltd. (267), a Chinese steelmaker that’s opening an iron-ore mine in Australia, dropped 2.7 percent. Country Garden Holdings Co., a developer controlled by billionaire Yang Huiyan, slid 1 percent. China Railway Construction Corp., a builder of train lines and other infrastructure, advanced 1.2 percent. Zijin Mining Group Co., China’s largest gold producer, climbed 2.4 percent after agreeing to buy the rest of Australia’s Norton Gold Fields Ltd.

China’s manufacturing missing estimates “shows the economy is slowing,” said Francis Lun, managing director at Lyncean Holdings Ltd. “When manufacturing slows, raw-material supply should suffer, such as steel and aluminum.”

The Hang Seng Index (HSI) slipped 0.4 percent to 18,558.34 as of the midday trading break in Hong Kong, having swung between a gain of as much as 0.5 percent and a loss of 0.8 percent. Almost three shares fell for every two that fell on the gauge, as it completed its fourth week of decline. The Hang Seng China Enterprises Index of Chinese companies listed in Hong Kong slipped 0.7 percent to 9,620.87.

Raw-material producers declined after a report showed China’s Purchasing Managers’ Index, a measure of manufacturing, fell to 50.4 points in May from 53.3 in April, the slowest growth since December and missing the 52 median estimate of economists. A reading above 50 indicates expansion.

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“The PMI figure shows the deceleration of economic growth isn’t over,” said Wu Kan, a Shanghai-based fund manager at Dazhong Insurance Co., which oversees $285 million. “We’ll probably see more measures from the government going forward to put the economy back on to the growth track.”

Chinese developers dropped. Home prices fell 0.3 percent in May from April to a 16-month low as officials pledged to keep property curbs that have sapped buyer demand, according to data from SouFun Holdings Ltd., the nation’s biggest real-estate website owner.

The benchmark Hang Seng Index has slumped about 14 percent from this year’s peak, dragging the value of shares on the gauge to 9.5 times estimated earnings on average as of yesterday. That compares with 12.5 times for the Standard & Poor’s 500 Index and 9.9 times for the Stoxx Europe 600 Index.

Futures on the Hang Seng Index expiring this month lost 0.6 percent to 18,420. The HSI Volatility Index (VHSI) added 1.9 percent to 28.87, indicating traders expect a swing of about 8.3 percent in the next 30 days.

To contact the reporters on this story: Nick Gentle in Hong Kong at ngentle2@bloomberg.net; 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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