Most Hong Kong stocks fell, with an index of Chinese companies dropping for the first time in four days, as slower growth in industrial companies’ profits added to signs the world’s No. 2 economy is losing steam.
Jiangxi Copper Co. (358), the country’s biggest producer of the metal, fell 4.2 percent and China Coal Energy Co., the second- largest coal producer, slumped 6.2 percent after saying it expects a drop in first-half profit. China Resources Power Holdings Co., the No. 1 Chinese electricity producer by value in Hong Kong, rose 1.8 percent after China Electricity Council said the nation’s power use may rise.
The Hang Seng China Enterprises Index (HSCEI) of mainland companies traded in the city declined 0.5 percent to 10,785.58 at the close, its biggest drop since April 23. About nine stocks fell for every seven that gained on the Hang Seng Composite Index, the city’s broadest equity measure. Mainland equity markets are closed through May 1 for public holidays. The benchmark Hang Seng Index (HSI) gained 0.2 percent, with trading volume 21 percent less than the 30-day intraday average.
“There’s definitely some weakness in the Chinese economy,” Adrian Mowat, chief Asia and emerging-market strategist at JPMorgan Chase & Co., said on Bloomberg Television today. Stimulus measures by the government aren’t generating the growth he would expect. “It sounds like the central bank governor wants to take away the stimulus before the economy’s got going. The Chinese stock market’s in a very difficult position at the moment,” he said.
The Hang Seng Index declined 5.4 percent from a Jan. 30 high through April 26 amid disappointing economic data from China, the outbreak of a new bird-flu virus and renewed concern about Europe’s debt crisis. Year-to-date, Hong Kong’s benchmark index is the second-worst performer among developed markets.
The measure traded at 10.8 times estimated earnings on April 26, compared with a five-year average of 12.7 and the Standard & Poor’s 500 Index’s multiple of 14.4, data compiled by Bloomberg show.
Growth in Chinese industrial company profits slowed in March. Net income increased 5.3 percent from a year earlier, down from a 17.2 percent pace in the first two months, the National Bureau of Statistics said on its website on April 27. Profit in the first quarter rose 12.1 percent, it said.
Measures of industrial goods, energy and materials companies had the three biggest declines among the Hang Seng Composite Index’s 11 industries. Tianneng Power International Ltd. (819), a maker of storage batteries, tumbled 8.2 percent to HK$4.79. Zoomlion Heavy Industry Science & Technology Co., China’s second-biggest construction equipment maker, sank 5.1 percent to HK$7.66.
China Coal Energy slumped 6.2 percent to HK$5.91, the steepest drop in the Hang Seng Index, after saying it expects a decline in first-half profit on low coal prices. Yanzhou Coal Mining Co., China’s third-largest producer of the fuel by market value, retreated 4.4 percent to HK$8.07 after the stock was cut to neutral from buy at Bank of America Merrill Lynch.
Jiangxi Copper fell 4.2 percent to HK$14.92 after saying it expects its first-half profit will slump by more than 50 percent on current or lower copper prices, and after the London Metal Exchange Index of industrial metals slid 2.3 percent on April 26.
“Right now the sentiment is not too poor, but people will still be cautious,” said Alex Wong, a Hong Kong-based director at Ample Capital Ltd. “Overall, the resources sector in China is very weak as commodity prices remain weak.”
Electricity Producers Gain
Futures on the Standard & Poor’s 500 Index climbed 0.3 percent today. Most shares in the U.S. dropped on April 26, paring a weekly gain, after data showed the world’s largest economy grew less than economists forecast in the first quarter and amid disappointing earnings reports.
Gross domestic product expanded at a 2.5 percent annual rate in the first quarter, trailing the 3 percent estimate of 86 economists surveyed by Bloomberg.
Utilities had the biggest gain among the Hang Seng Index’s four industry groups. China Resources Power increased 1.8 percent to HK$25.40, while Huaneng Power International Inc. (902), the publicly traded unit of China’s largest electricity producer, climbed 1.8 percent to HK$8.87.
China’s power consumption is expected to rise by 2.51 trillion kilowatt hours to 2.53 trillion in the first half of this year, China Electricity Council said in a statement on its website.
Hang Seng Index futures were little changed at 22,560. The HSI Volatility Index gained 3 percent to 16.07, indicating traders expect a swing of 4.6 percent for the equity benchmark in the next 30 days.
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