Hong Kong stocks fell as Chinese retailers and food companies retreated after Premier Wen Jiabao warned the mainland’s labor situation will become more “severe.” A rebound in China’s home prices was seen to constrain the government’s ability to further promote growth.
China Resources Enterprise Ltd. (291), a brewer and operator of supermarkets, dropped 2.7 percent for a 10th slide in 11 days. China Resources Land Ltd. declined 5.9 percent. Techtronic Industries Co., which makes Ryobi power tools and gets 72 percent of sales in North America, added 4.9 percent as U.S. Federal Reserve Chairman Ben S. Bernanke said the central bank is looking at ways to boost the world’s largest economy if the labor market stalls.
The Hang Seng Index dropped 1.1 percent to 19,239.88 at the close of trading in Hong Kong, with more three companies retreating for each that advanced in the 49-member gauge. Volume was 22 percent lower than the 30-day intraday average. The Hang Seng China Enterprises Index of mainland companies slipped 0.9 percent to 9,292.55. China’s State Council met today.
“Wen’s comments confirmed to the market that the Chinese economy is worsening and that the pace of the slowdown is much faster than the government originally thought,” said Lewis Wan, Hong Kong-based chief investment officer at Pride Investments Group Ltd., which manages $250 million of assets. “If the government shows the market that it is determined to provide stimulus, that would help the market to improve.”
The benchmark Hang Seng Index (HSI) fell 11 percent from this year’s high in February through today on signs Europe’s debt crisis is worsening while growth slows in China and the U.S. The drop cut the value of shares on the gauge to 10.1 times estimated earnings on average, compared with 13.1 for the Standard & Poor’s 500 Index and 10.8 for Stoxx Europe 600 Index.
“We will encourage long-term investors to buy at the moment, especially the banks and developers,” said Pride Investment’s Wan.
China Resources Enterprise dropped 2.7 percent to HK$20.10, its lowest level since September 2009, after Wen’s comments spurred speculation that a difficult labor market will hurt earnings for companies that sell to consumers.
Tingyi (Cayman Islands) Holding Corp., a noodle maker, slipped 1.5 percent to HK$19.42. Want Want China Holdings Ltd., which sells snack foods like rice crackers and beverages, retreated 4 percent to HK$9.20.
China’s home-price rebound makes it more difficult for the government to loosen policies aimed at restricting gains in the property sector, said Nomura Holdings Inc. economist Zhang Zhiwei. Prices climbed in 25 cities out of the 70 the government looks at and fell in 21 from a month earlier, according to data released by the statistics bureau today.
China Resources Land slid 5.9 percent to HK$14.92. China Overseas Land & Investment Ltd. (688), the biggest Hong Kong-listed mainland developer by value, fell 4 percent to HK$17.80.
Among other stocks that retreated, Huaneng Renewables Corp. (958), a clean-energy unit of China’s biggest electricity producer, dropped 14 percent to HK$1, its lowest level since listing last year. The company said that profit for the first half of the year may fall by more than 50 percent due to output constraints and a decrease in wind speed.
Companies that receive revenue from the U.S. increased after Bernanke’s comments on speculation support for the labor market will translate into better earnings. Li & Fung Ltd. (494), a supplier to Wal-Mart Stores Inc., advanced 0.1 percent to HK$14.04. China Merchants Holdings International Co. (144), climbed 1.4 percent to HK$24.50. Techtronic added 4.9 percent to HK$9.90.
Futures on the Hang Seng Index fell 1.4 percent to 19,209. The HSI Volatility Index (VHSI) rose 2.8 percent to 19.46, indicating traders expect a swing of about 5.6 percent in the benchmark index during the next 30 days.
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