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Hong Kong Stocks Swing From Gains, Loss on Airlines

Hong Kong stocks swung between gains and losses as airlines rebounded after plunging last week amid an outbreak of a new strain of bird flu in China. Developers slid after a housing provident fund said Beijing raised down payments for some second-home purchases.

Cathay Pacific Airways Ltd. (293), Asia’s largest international carrier, climbed 3.4 percent after slumping to a seven-month low last week. China Resources Land Ltd. (1109), the second-biggest mainland property company traded in Hong Kong, slid 1.2 percent. Prada SpA (1913), an Italian maker of luxury handbags, retreated 5.3 percent after Barclays Plc cut its rating. Man Wah Holdings Ltd., a sofa maker that gets half of its sales from the U.S., fell 2.3 percent after the nation’s payrolls rose less than forecast.

The Hang Seng Index slid 0.2 percent to 21,681.29 as of 11:19 a.m. in Hong Kong after rising less than 0.1 percent. About three stocks fell for every two that advanced on the gauge, with volume 9 percent below the 30-day intraday average. The measure last week slumped to its lowest level since November on concern an outbreak of bird flu in China may cause an epidemic.

“There’s going to be near-term pressure no matter how you cut it,” said Marco Li, Hong Kong-based portfolio manager at Manulife Asset Management, which oversees $238 billion globally. “You have this overhang now, and until you get clarity, people will see that as a potential risk for further exacerbation.”

Mainland Shares

The Hang Seng China Enterprises Index of mainland companies was little changed after dropping 3.1 percent on April 5. China’s Shanghai Composite Index retreated 1.2 percent as it opened for the first time since April 3.

The Hang Seng Index fell 8.8 percent through last week from this year’s high in January as Hong Kong and mainland developers led declines amid government efforts to rein in property prices, and on concern Cyprus’s banking woes will reignite Europe’s debt crisis. The measure traded at 10.4 times average estimated earnings on April 5, compared with 14 for the Standard & Poor’s 500 Index and 12.3 for the Stoxx Europe 600 Index, according to data compiled by Bloomberg.

China Resources Land dropped 1.2 percent to HK$20.75, while Shimao Property Holdings Ltd. (813), a mainland developer controlled by billionaire Hui Wing Mau, fell 0.8 percent to HK$14.84. Beijing increased the minimum down payment on second-home purchases to 70 percent for buyers who apply for loans from the housing provident fund, according to a statement posted on the fund management agency’s website today.

Wealth Distribution

Separately, China needs to impose a tax on existing properties to ease the impact of unequal wealth distribution after rapid growth in property prices, the China Securities Journal said in a commentary.

China tried to ease concerns that a new strain of bird influenza will spark an epidemic as authorities reported three more infections of the deadly H7N9 virus that’s killed six people since March. More than 600 people have been infected with the H5N1 bird flu strain since 2003, and almost 60 percent have died, according to the World Health Organization.

During the 2003 Sars outbreak, the Hang Seng Index (HSI) hit its lowest level since the Asian financial crisis. The gauge closed at 8,409.01 on April 25, the lowest since Oct. 8, 1998.

Sars killed 300 people in Hong Kong, prompting governments worldwide to impose travel restrictions on the city as mainland authorities sought initially to cover up the disease’s spread. Gross domestic product contracted 2.4 percent during the quarter, the most until the depths of the global financial crisis in 2009.

Property Prices

The Centaline Property Centa-City Monthly Index of home prices fell to a record low of 31.37 in April 2003, prompting a raft of support measures from the city’s government. The Centaline gauge was at 116.48 at the end of January.

“It’s tough because in investors’ minds a lot of people can remember Sars in 2003,” said Li. “There’s a bit of fear from what potentially can happen, especially in Hong Kong, because they do remember the magnitude of it.”

Futures on the S&P 500 (SPX) were little changed today. The gauge dropped 0.4 percent April 5 after data showed the U.S. economy added less than half the number of jobs economists forecast in March.

Hang Seng Index futures climbed 0.1 percent to 21,667. The HSI Volatility Index (VHSI) gained 1.7 percent to 17.25, indicating traders expect a swing of 4.9 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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