Hong Kong Stocks Fall Before Fed Meeting; Developers Jump

Hong Kong stocks fell, with the benchmark index paring its biggest monthly gain since September, as investors awaited the outcome of the Federal Reserve’s policy meeting. Chinese developers jumped after the government endorsed property-market development.

Li & Fung Ltd., a supplier of toys and clothes to Wal-Mart Stores Inc., slumped 2.3 percent. Tencent Holdings Ltd. (700), China’s No. 1 Internet company, dropped 3.3 percent after closing at a record high yesterday. Sinofert Holdings Ltd. (297), a Chinese fertilizer producer, tumbled to its lowest close in a year amid speculation prices will drop. China Resources Land Ltd. (1109), the second-biggest mainland developer traded in Hong Kong, rose 3.4 percent.

The Hang Seng Index (HSI) slid 0.3 percent to 21,883.66 in Hong Kong at the close, capping a 5.2 percent gain this month. About three stocks dropped for every two that rose today, with volume 28 percent lower than the 30-day average. The Hang Seng China Enterprises Index of mainland companies retreated 0.1 percent to 9,658.54.

“Market sentiment remains cautious ahead of the Fed meeting,” said Ben Kwong, chief operating officer at KGI Asia Ltd. Still, China policymakers’ comments on stable growth mean “the central leadership is closely monitoring the situation and the market believes there will be more policies coming if things worsen.”

China’s ruling Politburo pledged to stabilize growth while pressing on with reforms after exports fell by the most since the global financial crisis. China’s 7.5 percent growth target this year is under threat after a second straight quarterly slowdown. Official data due tomorrow is expected to show a contraction in mainland manufacturing.

Fed Meeting

The Hang Seng Index fell 3.4 percent this year, the second-worst performance among developed markets tracked by Bloomberg, as shares slid on weaker growth in China and concern the Federal Reserve will taper stimulus. The gauge traded at 10.4 times estimated earnings, compared with 15.3 for the Standard & Poor’s 500 Index.

The Federal Open Market Committee, which has said it may start paring stimulus should the U.S. economy meet the central bank’s forecasts, concludes its two-day meeting today. Policy makers will begin to reduce the central bank’s $85 billion of monthly bond purchases in September, a Bloomberg survey shows.

Li & Fung fell 2.3 percent to HK$10.26. AAC Technologies Holdings Inc. (2018), a maker of acoustic components that gets most of its revenue from the U.S., slid 1.4 percent to HK$36.10.

Tencent Drops

Tencent slid 3.3 percent to HK$351.80, the biggest decline on the Hang Seng Index. The stock surged 46 percent this year through yesterday.

TPV Technology Ltd. (903), which makes television monitors, slumped 6.1 percent to HK$1.53 after saying it expects a first-half loss after tax compared with profit a year earlier.

Sinofert tumbled 7.6 percent to HK$1.21, its lowest close since July 2012. Chinese potash producers are bracing for a price war after OAO Uralkali broke from a cartel that controlled about 40 percent of world exports, potentially weakening prices.

Developers led gains on the Hang Seng Index. China will seek “stable and healthy” growth of the property market, the government said on its website yesterday after a meeting led by President Xi Jinping. It is the first time this year that the government didn’t mention further real-estate curbs, according to Credit Suisse Group AG and Orient Finance Holdings (H.K.) Ltd.

China Resources Land jumped 3.4 percent to HK$21.30. Guangzhou R&F Properties Co. (2777), a builder in the southern Chinese city, rose 6.7 percent to HK$12.06.

Huaneng Power

Among other stocks that advanced, Huaneng Power International Co. increased 1.9 percent to HK$8.10. The unit of China’s largest electricity producer said first-half net income surged to 5.62 billion yuan from 2.12 billion yuan ($917 million from $346 million) a year earlier.

Futures on the S&P 500 rose 0.1 percent today. The U.S. equity gauge gained less than 0.1 percent yesterday as investors weighed earnings reports and awaited results from the Federal Reserve’s two-day policy meeting. Home prices rose in May by the most in more than seven years as the recovery in the U.S. property market gained momentum.

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 traded at 1.17 times the value of net assets, 34 percent lower than its five-year average of 1.78.

Hang Seng Index futures slid 0.4 percent to 21,865. The HSI Volatility Index rose 2 percent to 18.13, indicating traders expect a swing of 5.2 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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