Hong Kong Stocks Fall as NetDragon Drops; Solars Surge

Hong Kong stocks slid with a gauge of Chinese companies listed in the city erasing yesterday’s gains. NetDragon Websoft Inc. (777) tumbled after Baidu Inc. agreed to buy a unit from the game developer. Solar shares surged on China’s plan to boost generation capacity fivefold.

The Hang Seng China Enterprises Index of mainland shares fell 0.9 percent to 9,355.93 in Hong Kong of 10:21 a.m. The benchmark Hang Seng Index fell 0.4 percent to 21,221.06, with almost three stocks declining for each that rose. Trading volume on the measure was 53 percent less than its 30-day intraday average.

The Hang Seng China Enterprises Index, also known as the H-share index, fell 23 percent from a Feb. 1 high through yesterday, meeting some investors’ definition of a bear market. The measure traded at 1.14 times the value of net assets yesterday, compared with its five-year average of 1.79.

China yesterday reported 7.5 percent economic growth in the second quarter, down from 7.7 percent in the first three months of the year, as factory output weakened. The country expects annual growth of slightly more than 7.5 percent, with room for policymakers to maneuver to meet the target, according to a Securities Times report citing Jia Kang, director of the Finance Ministry’s fiscal science research center.

Hang Seng Index (HSI) futures fell 0.1 percent to 21,187. The HSI Volatility Index slid 0.2 percent to 20.57, indicating traders expect a swing of 5.9 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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