Hong Kong Stocks Pare Losses as China Manufacturing Grows

Hong Kong stocks swung between gains and losses after retail sales in the city rose more than estimated and reports showed China’s manufacturing expanded.

China Resources Power Holdings Co. (HSI) jumped 3.5 percent as energy companies gained on speculation greater factory output will mean more demand for electricity. Luk Fook Holdings International Ltd. climbed 2.2 percent as a report showed Hong Kong’s retail sales increased 8.8 percent in December. China Overseas Land & Investment Ltd., the biggest mainland developer listed in Hong Kong, fell 2.3 percent after home prices in China posted their biggest gain in two years, sparking concern that the government will introduce additional property curbs.

The Hang Seng Index was fell 0.2 percent to 23,673.33 at 3:14 p.m. after falling as much as 0.7 percent. The Hang Seng China Enterprises Index climbed 0.3 percent to 12,163.22, reversing an earlier loss of 1.2 percent after an official purchasing managers’ index expanded less than economists had forecast. That was countered by a separate survey from HSBC Holdings Plc and Markit Economics that showed an acceleration.

“Stocks went down at first on worse-than-expected official PMI, then the investors start to ponder if it’s just a seasonal effect,” Li Jun, a strategist at Central China Securities Co., said from Shanghai. “When HSBC PMI was better-than-expected, the worry was removed, so stocks went up again. However in the longer term, it’s harder for the stock market to continue this rally because it’s already risen a lot and most reasons have been priced in.”

China Recovery

The Hang Seng Index rallied the past five months, the longest such streak since July 2009, after the U.S. Federal Reserve embarked on a third round of quantitative easing in September and on optimism China’s recovery will continue. Asia’s biggest economy is expected to expand 7.5 percent to 9 percent this year, a Bloomberg survey last week showed.

Trading volume on the Hang Seng Index was 0.3 percent below the 30-day moving average at the time, according to data compiled by Bloomberg. Shares on the gauge traded at 11.5 times estimated earnings, compared with 13.6 for the Standard & Poor’s 500 Index.

The Hang Seng China Enterprises Index (HSCEI) of mainland companies slipped 0.3 percent to 12,097.50. The official Purchasing Managers’ Index, a gauge for manufacturing activity, unexpectedly fell last month as export orders contracted and production slowed, signaling a recovery in the world’s second- biggest economy has yet to gain momentum.

China PMI

The reading was 50.4 in January, the National Bureau of Statistics and China Federation of Logistics and Purchasing said today in Beijing as they more than tripled the number of companies surveyed to 3,000. That compares with a median estimate of 51 in a Bloomberg News survey of 33 analysts and 50.6 in December. A figure above 50 indicates expansion.

A separate survey conducted by HSBC Holdings Plc and Markit Economics showed the January PMI rose to 52.3 from 51.5 in December.

China Resources Power gained 3.5 percent to HK$22.20. China Oil & Gas Group Ltd. rose 3.3 percent to HK$1.27. ENN Energy Holdings Ltd. added 4 percent to HK$1.50.

Hong Kong’s December retail sales increased 8.8 percent compared with an analyst estimate of 7.6 percent, according to a report released yesterday.

Luk Fook gained 2.2 percent to HK$27.80. Cosmetic retailers L’Occitane International SA (973) and Sa Sa International Holdings Ltd., rose 3.7 percent to HK$24.15 and 1.6 percent to HK$7.11 respectively.

Developers Fall

Chinese developers dropped after China’s new home prices rose 1 percent in January, according to SouFun Holdings Ltd., the country’s biggest real estate website owner. Rapid price gains may spark concern about policy tightening, Alan Jin, a Hong Kong-based analyst at Mizuho Securities Asia Ltd., wrote in an email.

China Overseas Land fell 2.3 percent to HK$23.40. China Resources Land Ltd., a state-owned developer, decreased 2.1 percent to HK$23.10. Guangzhou R&F Properties Co. (2777) dropped 0.4 percent to HK$14.00.

To contact the reporters on this story: Jonathan Burgos in Singapore at jburgos4@bloomberg.net; Eleni Himaras in Hong Kong at ehimaras@bloomberg.net

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

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