Hong Kong Stocks Decline as China Services PMI Drops

Hong Kong stocks fell, with a benchmark index heading for a second day of decline, after the city’s retail sales missed analysts’ estimates and China’s services industry expanded at a slower pace.

The Hang Seng Index (HSI) slipped 1.4 percent to 20,379.48 as of 9:51 a.m. in Hong Kong, with all but three shares falling. The Hang Seng China Enterprises Index (HSCEI), which capped its worst start to a year since 2008 last month, lost 2.3 percent to 8990.34.

The city’s benchmark gauge posted its biggest monthly decline in a year last month as China’s money-market rates surged to record and after Federal Reserve Chairman Ben S. Bernanke said policy makers may start dialing down stimulus if the U.S. economy shows sustained improvement.

The gauge of mainland equities traded in Hong Kong, also known as the H-share index, has fallen more than 20 percent from its Feb. 1 high, meeting some investors’ definition of a bear market. The measure traded at 6.8 times estimated earnings as of yesterday, 28 percent below a three-year average of 9.42.

Shares on the benchmark Hang Seng Index traded at 9.7 times estimated earnings as of yesterday, compared with multiples of 14.6 for the Standard & Poor’s 500 Index and 12.7 for the Stoxx Europe 600 Index, according to data compiled by Bloomberg.

Futures on the S&P 500 Index retreated 0.1 percent after the U.S. measure yesterday slid 0.1 percent. Data today from the ADP Research Institute may indicate American companies increased employment in June.

The Hang Seng Index futures dropped 1.4 percent to 20,349. The HSI Volatility Index gained 5.4 percent to 22.52, indicating traders expect a swing of 6.5 percent for the equity benchmark in the next 30 days.

To contact the reporter on this story: Jonathan Burgos in Singapore at jburgos4@bloomberg.net

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

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