Hong Kong Stocks Fall on China Stimulus Bets Before Fed

Hong Kong stocks fell as investors awaited the Federal Reserve’s announcement today and after a Chinese newspaper commentary said massive stimulus measures would threaten the nation’s sustainable growth.

Belle International Holdings Ltd. (1880), a footwear maker that gets most of its revenue from China, sank 4 percent. Anhui Conch Cement Co., China’s biggest supplier of the building material, fell 1.1 percent. ZTE Corp., a telecommunications-systems maker, rose 2.8 percent after setting up China’s first fourth- generation commercial wireless data network. Sino-Ocean Land Holdings Ltd. (3377) jumped 6.2 percent after the Chinese developer’s equity rating was raised to buy from neutral at Citigroup Inc.

The Hang Seng Index fell 0.1 percent to 20,047.63 at the close, after rising as much as 0.4 percent and swinging between gains and losses at least 12 times. More than twice as many stocks dropped as rose on the 49-company gauge. Volume on the measure was 11 percent below its 30-day average ahead of the U.S. central bank meeting, according to data compiled by Bloomberg.

The Fed plans to issue a statement today after the conclusion of a two-day meeting, followed by the release of policy makers’ forecasts for unemployment, inflation and the expected path of the federal funds rate over the next several years. Chairman Ben S. Bernanke plans to hold a press conference afterward.

“Investors are still waiting for Bernanke’s edict,” said Francis Lun, managing director at Lyncean Holdings Ltd., a Hong Kong-based brokerage. “Don’t expect too much from China. The lesson is that if it relaxes policy, all hell will break lose. If you tighten control, everything will collapse. They have never managed to find the middle ground, the better choice is to do nothing and let the economy take care of itself.”

Equity Valuations

The Hang Seng China Enterprises Index of mainland companies, also known as the H-share index, fell 0.1 percent to 9,480.27. The Hang Seng Index traded at 10.6 times estimated earnings on average yesterday, compared with 9.7 for the Shanghai Composite Index and 13.9 for the Standard & Poor’s 500 Index. (SPXL1)

The Hong Kong gauge climbed 10 percent from this year’s low on June 4 through yesterday as negative economic reports heightened optimism central banks will act to boost growth.

Futures on the S&P 500 slid 0.2 percent today. The index added 0.2 percent in New York yesterday, when the Fed began a two-day meeting. The central bank will probably announce a third round of bond purchases today, according to almost two-thirds of economists in a Bloomberg survey.

Stocks also rose after Germany’s Federal Constitutional Court dismissed motions that sought to stop the government from contributing to the bailout fund for debt-stricken nations in the euro zone.

Easing Expectations

“Looks like people are expecting some form of easing, and the market will wait for that uncertainty to be cleared,” said Matt Riordan, a portfolio manager who helps manage about $6.5 billion in Sydney at Paradice Investment Management Pty. “Ultimately they will do something, but it’s an issue of timing whether they will do it now or they will wait toward the end of the year,” he said of the Fed deliberations.

In China, massive stimulus measures would be “detrimental” to sustainable economic growth, the official Xinhua News Agency wrote in a commentary. That came after Premier Wen Jiabao on Sept. 11 signaled there’s more room for fiscal and monetary policy to meet growth targets.

Belle sank 4 percent to HK$14.02, while Anhui Conch retreated 1.1 percent to HK$22.65. Guangzhou Automobile Group Co., a Chinese partner of Toyota Motor Corp. and Honda Motor Co., declined 2.9 percent to HK$5.36.

Neptune Soars

Among stocks that rose, Neptune Group Ltd., a leisure and gaming company, jumped 15 percent to 19.3 Hong Kong cents after saying it expects full-year profit to rise “significantly.”

ZTE gained 2.8 percent to HK$10.86. The company set up China’s first 4G wireless data network for the Beijing municipal government. The company began trials of the network at the end of last year and today announced the beginning of commercial service.

Sino-Ocean Land surged 6.2 percent to HK$3.95 after its equity rating was upgraded by Citigroup, which yesterday said the developer’s sales and margins should have a positive surprise against bearish market assumptions.

Other Chinese developers gained after Securities Times reported the southern Chinese city of Shenzhen increased the maximum housing fund loan for families to 900,000 yuan from 800,000 yuan ($142,000 from $126,400). Guangzhou R&F Properties Ltd., a property company in the southern Chinese city, climbed 3 percent to HK$9.39. China Resources Land Ltd. gained 4.5 percent to HK$17.24.

Futures on the Hang Seng Index (HSI) declined 0.1 percent to 20,041. The HSI Volatility Index (VHSI) sank 0.7 percent to 18.74, indicating traders expect a swing of 5.4 percent for the equity benchmark in the next 30 days.

To contact the reporter on this story: Kana Nishizawa in Hong Kong at knishizawa5@bloomberg.net.

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

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