Hong Kong Stocks Decline Ahead of China Inflation Report

Hong Kong stocks fell for the first time in three days, led by property developers, ahead of the release of China’s inflation data tomorrow.

The Hang Seng Index (HSI) slid 1.9 percent to 20,463 as of 9:31 a.m. in Hong Kong, with all stocks on the 50-member gauge declining. The Hang Seng China Enterprises Index (HSCEI), down more than 20 percent from the year’s high, retreated 2.5 percent to 8,975.09.

The Hang Seng Index last month posted its biggest quarterly decline since 2011 as China’s money-market rates surged to record amid and after Federal Reserve Chairman Ben S. Bernanke said policy makers may start tapering stimulus if the U.S. economy shows sustained improvement.

China’s statistics bureau is scheduled to release June data on inflation tomorrow. Consumer prices probably rose 2.5 percent last month, compared with a 2.1 percent gain in May, according to the median estimate of 31 economists in a Bloomberg survey. Investors will be watching the inflation data closely as growth slows, although the central bank said last week it will pursue prudent monetary policy.

The Hang Seng China Enterprises Index, also known as the H-share index, closed 25 percent below its Feb. 1 high on July 5, with a 20 percent drop meeting some investors’ definition of a bear market. The measure trades at 1.11 times the value of net assets, near levels not seen since the depths of the 2008 global financial crisis.

Shares on the benchmark gauge traded at 9.9 times estimated earnings on July 5, compared with multiples of 14.81 for the Standard & Poor’s 500 Index and 12.77 for the Stoxx Europe 600 Index, according to data compiled by Bloomberg. The Hang Seng China Enterprises Index, also known as the H-share index, is down more than 20 percent from its Feb. 1 high, meeting some investors’ definition of a bear market.

The Hang Seng Composite Index, the city’s broadest equity measure, is down 8.5 percent this year through July 5, led by material and energy companies. Only two of the 11 industry groups, information technology and utilities, have gained this year.

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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