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Hong Kong Stocks Erase This Year’s Gains on China, Europe

Hong Kong stocks fell, with the benchmark index erasing this year’s gains, amid concern China may tighten monetary policy and introduce more measures to curb property prices, and as Italian elections renewed concern over Europe’s debt crisis.

China Construction Bank Corp. (939), the world’s No. 2 lender by value, dropped 2.4 percent after a report China may tighten monetary policy. Shimao Property Holdings Ltd. (813), the Chinese developer controlled by billionaire Hui Wing Mau, sank 4.8 percent after Shanghai Securities News reported Beijing drafted new property control measures. Esprit Holdings Ltd. (330), a clothier that gets 79 percent of its sales from Europe, slid 1.4 percent.

The Hang Seng Index slid 1.3 percent to 22,519.69, its lowest close since Dec. 21. Almost six stocks retreated for each that rose on the gauge, which is heading for its first month of decline since August. Trading volume was about 9.1 percent below the 30-day average. The Hang Seng China Enterprises Index of mainland companies dropped 2 percent to 11,104.10.

“Markets have moved a great deal in the past six months as investors overcame a lot of pessimism,” said Sandy Mehta, Hong Kong-based chief executive officer of Value Investment Principals Ltd. “You will see some more property measures from Hong Kong and China’s authorities. They are trying to walk a tightrope where they want to continue to stimulate growth but are concerned about property and commodity prices.”

The Hang Seng Index (HSI) gained 9.5 percent from the end of September through yesterday, amid signs of economic recovery in the U.S. and China as central banks added stimulus to boost growth. The gauge traded at 11.1 times average estimated earnings yesterday, compared with 13.5 for the Standard & Poor’s 500 Index and 12.4 for the Stoxx Europe 600 Index, according to data compiled by Bloomberg.

Excess Liquidity

Chinese banks declined after a front-page commentary in China Securities Journal said the nation may tighten monetary policy because of excessive liquidity in the market and rising property prices.

A measure of financial companies had the biggest drop among the Hang Seng Index’s four industry groups. China Construction Bank declined 2.4 percent to HK$6.17. Agricultural Bank of China Ltd. fell 2.3 percent to HK$3.91.

Chinese developers declined after Shanghai Securities News said Beijing has completed a draft of property control measures, which will be released after the central government issues more detailed policies. The report cited an unidentified person.

Shimao dropped 4.8 percent to HK$14.94. Evergrande Real Estate Group Ltd. (3333), which gets all its revenue from China, retreated 4.3 percent to HK$3.58.

Earnings Drop

Anta Sports Products Ltd. (2020) fell 6.6 percent to HK$7.06 after the Chinese sportswear maker’s rating was cut to underperform from neutral at CCB International Securities Ltd. The company yesterday reported full-year earnings that missed analyst estimates.

Power Assets Holdings Ltd. rose 1.1 percent to HK$70.95, leading gains among utilities. Hong Kong & China Gas Ltd. advanced 0.5 percent to HK$21.50. CLP Holdings Ltd. (2), Hong Kong’s biggest electricity supplier, rose 0.5 percent to HK$66.85. CLP dropped the most since Jan. 3 yesterday after its full-year profit missed analyst estimates.

Italy may require another vote after partial election results suggested the four-way race may end in a divided parliament, an aide to Democratic Party candidate Pier Luigi Bersani said. Bersani, who led in opinion polls throughout the race, campaigned to maintain the budget rigor of outgoing Prime Minister Mario Monti.

Esprit slid 1.4 percent to HK$10.18. AAC Technologies Holdings Inc. (2018), which supplies speakers for Apple Inc.’s iPhone and gets more than a quarter of its revenue from Europe, sank 1.3 percent to HK$31.05. Hutchison Whampoa Ltd., an owner of retail chains and ports that counts Europe as its biggest market, dropped 3 percent to HK$82.05.

Futures on the Hang Seng Index dropped 1.3 percent to 22,560. The HSI Volatility Index (VHSI) surged 13 percent to 18.11, the biggest increase since July 23, indicating traders expect a swing of 5.2 percent for the gauge 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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