Hong Kong Stocks Fall on Spain Downgrade, Global Growth

Hong Kong stocks fell as Spain’s credit rating was cut, Credit Suisse Group AG reduced its outlook for China’s economy and economic reports in the U.S and Europe added to concern the global economy is slowing.

Esprit Holdings Ltd. (330), a clothier that gets most of its sales in Europe, plunged 11 percent as it resumed trading after dropping the most in 15 years yesterday. AAC Technologies Holdings Inc., a maker of miniature acoustic components that gets more than a quarter of its revenue from Europe, slid 2.3 percent. China Minsheng Banking Corp., the nation’s first non- state lender, fell 0.8 percent after Credit Suisse cut its economic growth forecast for the country for this year and next.

“Equities investors are looking for signs of a growth surprise,” said Khiem Do, Hong Kong-based head of Asian multi- asset strategy at Baring Asset Management Asia Ltd., which oversees about $10 billion. “Growth surprises around the world are not frequent these days so that’s why it has put a cap on any value in the market.”

The Hang Seng Index (HSI) slid 0.6 percent to 18,917.30 as of 1:04 p.m. local time, paring yesterday’s 0.8 percent gain. About three stocks fell for every two that rose in the 49-company gauge. Volume on the index was 37 percent below its 30-day average, according to data compiled by Bloomberg. The Hang Seng China Enterprises Index of mainland stocks fell 0.7 percent to 9,589.51.

The Hang Seng Index fell 12 percent through yesterday from a high this year on Feb. 29 amid concern Greece’s financial crisis is jeopardizing the future of the euro and amid signs that the economies of China and the U.S. are slowing. Shares on the Hang Seng Index traded at 9.8 times estimated earnings on average yesterday, compared with 12.6 times for the Standard & Poor’s 500 Index and 10.1 times for the Stoxx Europe 600 Index.

Esprit Departures

Esprit fell 11 percent to HK$9.43, extending yesterday’s 22 percent loss. Its chairman quit within 24 hours of the chief executive officer’s resignation. The fashion brand left the financial community in the dark on the resignations and succession plans. Chief Executive Officer Ronald Van der Vis quit June 12 and the Hong Kong-based company reported the departure of its chairman a day later.

“The moves could lead to questions regarding whether there are issues with the operation/accounts or there is a power struggle among the management team and the board,” Anne Ling, an analyst at Deutsche Bank AG, said in a note to clients.

Spain’s credit rating was downgraded three steps to Baa3 from A3 yesterday by Moody’s Investors Service, citing the nation’s increased debt burden, weakening economy and limited access to capital markets. Euro-area industrial production declined for a second month in April, led by a drop in Germany.

Financial Stocks

AAC fell 2.3 percent to HK$23.40. Hutchison Whampoa Ltd., a port operator controlled by billionaire Li Ka-Shing that gets about half its sales in the Europe, fell 1.1 percent to HK$63.55. Standard Chartered Plc, a London-based bank, fell 0.4 percent to HK$164.80.

Financial stocks led declines in Hong Kong after Credit Suisse cut China’s economic growth forecast for 2012 to 7.7 percent from 8 percent and for 2013 to 7.9 percent from 8.2 percent. The Hang Seng Finance Index (HSF) fell 0.7 percent.

China Minsheng fell 0.8 percent to HK$7.27. Bank of East Asia Ltd., which gets about 41 percent of its revenue from China, declined 0.8 percent to HK$25.55.

Retail sales in the U.S. fell in May for a second month, prompting economists to cut forecasts for economic growth as limited job and income gains hold back consumers. The 0.2 percent decrease matched April’s drop that was previously reported as a gain, Commerce Department figures showed yesterday in Washington.

Futures, Volatility

Li & Fung Ltd., a supplier to Wal-Mart Stores Inc., retreated 2 percent to HK$14.94. Techtronic Industries Co., a power-tools maker that relies on North America for almost three quarters of its sales, slid 2.4 percent to HK$9.15. Yue Yuen Industrial Holdings Ltd. (551), which makes shoes for Nike Inc., fell 3.5 percent to HK$23.80.

Hang Seng Index futures expiring this month slid 0.1 percent to 18,916. The HSI Volatility Index (VHSI) gained 2.8 percent to 27.11, indicating traders expect a swing of about 7.8 percent in the benchmark index during the next 30 days.

To contact the reporters on this story: Eleni Himaras in Hong Kong at ehimaras@bloomberg.net; Crystal Chui in Hong Kong at tchui4@bloomberg.net

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

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