Most Hong Kong Stocks Decline on U.S. Budget Talks

Most Hong Kong stocks fell amid signs U.S. budget negotiations are deteriorating. Metals producers dropped after prices of the commodities declined yesterday.

Aluminum Corp. of China Ltd., the nation’s biggest producer of the metal, fell 2 percent. Techtronic Industries Co., a maker of power tools that counts North America as its biggest market, retreated 2.5 percent. Esprit Holdings Ltd., a clothier that said it may post a first-half loss, extended its drop today after brokerages cut its rating or reduced target prices.

The Hang Seng Index (HSI) slid 0.1 percent to 22,592.84 as of 10:11 a.m. in Hong Kong. About four stocks fell for each that gained on the 50-company measure, with volume 7.2 percent below the 30-day average for the time of day, according to data compiled by Bloomberg. The Hang Seng China Enterprises Index of mainland companies fell 0.5 percent to 11,336.56.

“Cracks appeared in the fiscal-cliff negotiations,” said Stan Shamu, Melbourne-based markets strategist at IG Markets Ltd. “The Republicans failed to come up with a reasonable compromise to President Obama’s proposal. Market participants decided to exercise caution despite U.S. leaders still insisting they are hoping to have something done by Christmas.”

Hong Kong’s benchmark index advanced 23 percent this year through yesterday as central banks from the U.S., Europe and Japan announced stimulus to boost growth, and as U.S. and China showed signs of recovery in the world’s two largest economies. Shares on the measure traded at 11.9 times average estimated earnings yesterday, compared with 13.8 for the Standard & Poor’s 500 Index and 12.8 for the Stoxx Europe 600 Index, according to data compiled by Bloomberg.

‘Plan B Burden’

Standard & Poor’s 500 Index futures fell 0.2 percent today. The gauge slid 0.8 percent yesterday as White House Communications Director Dan Pfeiffer said House Speaker John Boehner’s “Plan B” would put “too big a burden on the middle class” and President Barack Obama would veto it. Boehner replied that Obama will be responsible for “the largest tax increase in American history” if Democrats don’t accept the measure the House plans to pass today.

The House may vote today on Boehner’s plan, which would raise tax rates on income of above $1 million, rather than the $400,000 threshold the president proposed in his latest offer.

Metal producers declined after the London Metal Exchange Index of six industrial metals slid 0.9 percent yesterday.

Futures on the Hang Seng Index dropped 0.1 percent to 22,588. The HSI Volatility Index (VHSI) rose 0.6 percent to 15.76, indicating traders expect a swing of 4.5 percent for the equity benchmark in the next 30 days.

To contact the reporters on this story: Kana Nishizawa in Hong Kong at knishizawa5@bloomberg.net; Adam Haigh in Sydney at ahaigh1@bloomberg.net.

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

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