Hong Kong Stocks Fall to Nine-Month Low on China Lending

Hong Kong stocks dropped to the lowest since September amid concern a credit crunch is worsening for Chinese banks and as preliminary data showed manufacturing fell more than expected. Shares also fell after the Federal Reserve said it may start paring stimulus this year.

Industrial & Commercial Bank of China Ltd. sank 2.1 percent, the lowest in eight months, after the seven-day repurchase rate posted its biggest one-day gain in seven years. Li & Fung Ltd., a supplier of clothing and toys to Wal-Mart Stores Inc., fell 1.4 percent.

The Hang Seng (HSI) declined 2.3 percent to 20,509.51 as of 10:01 a.m. in Hong Kong, with all 50 members the gauge declining. Trading volume was 8.7 percent above the 30-day intraday average. The Hang Seng China Enterprises Index (HSCEI) of mainland stocks listed in the city fell 2.8 percent to 9,313.50.

“There is a credit crunch in the near term,” Ben Kwong, chief operating officer at Hong Kong-based KGI Asia Ltd., said in a phone interview. “It’s reflecting the government’s effort to clean up outstanding financial issues. The intention of the People’s Bank of China is to put some pressure on banks to clean up their problems.”

The preliminary reading of 48.3 for a Purchasing Manager’s Index released today by HSBC Holdings Plc and Market Economics compares with a 49.1 median estimate in a Bloomberg News Survey. The reading for May was 49.2, with a number below 50 indicating contraction.

To contact the reporters on this story: Adam Haigh in Sydney at ahaigh1@bloomberg.net; Alan Wong in Hong Kong at awong478@bloomberg.net

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

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