Hong Kong Stocks Retreat Before Preliminary HSBC China PMI Data

Hong Kong stocks retreated, with a gauge of Chinese shares falling after its biggest one-day gain in six months, before the release of a preliminary survey on China’s manufacturing.

The Hang Seng Index (HSI) fell 0.3 percent to 21,850.86 as of 9:33 a.m. in Hong Kong. The Hang Seng China Enterprises Index of mainland shares, which surged 3.9 percent yesterday, dropped 0.2 percent to 9,762.05.

A preliminary survey of purchasing managers by HSBC Holdings Plc and Markit Economics may show a reading of 48.2 in July, according to the median estimates of 19 economists. That’s unchanged from the previous month and equal to the weakest since September. Readings above 50 signal expansion.

The Hang Seng Index is down 3.3 percent this year through yesterday, the third-worst performance among major developed markets after Greece and Austria, as shares slid on signs China’s growth is slowing and amid concern the Federal Reserve will taper its stimulus.

Shares on the city’s benchmark index traded at 10.5 times estimated earnings yesterday, compared with 15.4 times for the Standard & Poor’s 500 Index and 13.4 for the Stoxx Europe 600 Index, according to data compiled by Bloomberg.

China’s economy may be facing a period of instability and imbalance as it transitions from high-speed growth, researcher Yu Bin said in a report by China’s Development Research Center released yesterday in London. Market expectations are unstable, downward pressure has increased, and the economy has become unstable and uncertain like never before, he said.

Materials and energy companies led declines this year on the Hang Seng Composite on concern demand will weaken amid slower growth in China’s economy. Gauges of information technology, utilities and services were the only measures that rose among the index’s 11 industry groups.

The Hang Seng China Enterprises Index, also known as the H-share index, fell as much as 27 percent from a Feb. 1 high, meeting some investors’ definition of a bear market. The measure, which has since rebounded 10 percent, traded at 1.18 times the value of net assets yesterday, 34 percent lower than it five-year average of 1.78.

Futures on the S&P 500 were little changed today. The U.S. equity index dropped 0.2 percent yesterday in New York, as investors weighed corporate earnings amid speculation on when the Federal Reserve may scale back its asset purchases. The Richmond Fed’s gauge of manufacturing in the mid-Atlantic region unexpectedly fell to minus 11 in July.

A report due today is predicted to show gains in new home sales slowed in June, after data July 22 indicated previously owned house sales dropped amid rising mortgage rates.

Apple Inc., maker of the iPhone and iPad, reported after the close of U.S. markets third-quarter profit and sales that beat analysts’ estimates.

Hang Seng Index futures fell 0.2 percent to 21,844. The HSI Volatility Index slid to 18.5, the seventh retreat in eight days and indicating traders expect a swing of 5.3 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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