Hong Kong stocks fell for a second day before the U.S. Federal Open Market Committee’s announces whether it will pare record stimulus. Tencent Holdings Ltd. (700) drove the benchmark index lower, while city developers climbed.
Tencent Holdings Ltd., China’s No. 1 Internet company, fell 3.9 percent, retreating a second day from a record high. Prada SpA, an Italian maker of luxury handbags, sank 1.4 percent after missing profit estimates. Cheung Kong Holdings Ltd., the city’s second-biggest builder, jumped 3.1 percent as CLSA Ltd. reiterated its buy rating. Solar shares gained after China said it will limit new factories to curb excess panel capacity.
The Hang Seng Index declined 0.3 percent to 23,117.45 at the close in Hong Kong, its first back-to-back decline this month. Trading volume was 26 percent below the 30-day average. The Hang Seng China Enterprises Index (HSCEI) slid 0.6 percent to 10,588.01. The city’s markets are shut Sept. 20 for a holiday.
“The market is consolidating in absence of fresh incentives and ahead of the FOMC results,” said Ben Kwong, chief operating officer at KGI Asia Ltd. “The market already had gains and many shares were overbought. We have a long weekend coming up so investors don’t want to take heavy positions.”
The H-share index entered a bull market last week after rebounding more than 20 percent from a June low, while the Hang Seng Index (HSI) erased its 2013 loss. Shares climbed as China economic data including exports and factory output boosted confidence in the world’s second-biggest economy. Hong Kong’s equity benchmark traded at 11.1 times estimated earnings, compared with 15.4 for the Standard & Poor’s 500 Index.
Futures on the S&P 500 gained 0.1 percent today. The U.S. equity gauge added 0.4 percent yesterday in New York, sending the index toward a record, as Microsoft Corp. announced a $40 billion buyback and the Fed started its two-day meeting.
Analysts are divided on the amount by which the U.S. central bank will scale back its monthly asset purchases today. Among 64 economists surveyed by Bloomberg News, 33 predict the Fed will reduce its buying of Treasuries by $5 billion or less, with 31 forecasting a cut of $10 billion or more.
Tencent slumped 3.9 percent to HK$402.40, the second-biggest drop on the Hang Seng Index. The company’s market value this week surpassed $100 billion as the stock extended record highs this month. Shares traded at 37.5 times estimated earnings yesterday, compared with its five-year average of 29.3.
Bank of East Asia Ltd. today fell the most on the benchmark. Shares dropped 4.5 percent to HK$32.05 after climbing yesterday along with other family-run lenders after Wing Hang Bank Ltd. said shareholders were approached in a takeover bid.
Prada (1913) slid 1.4 percent to HK$78.50. First-half net income rose 7.6 percent to 308.2 million euros ($412 million), missing the 321 million-euro average of five estimates compiled by Bloomberg. The luxury brand said the euro’s strength will weigh more heavily on earnings than some analysts anticipate.
Shimao Property Holdings Ltd. (813), a mainland developer controlled by billionaire Hui Wing Mau, slumped 2.4 percent to HK$18.60. Guangzhou R&F Properties Co., a builder in the southern Chinese city, sank 1.4 percent to HK$12.62. Both climbed at least 1.9 percent in the previous two days.
“When share prices are too high, it gives an excuse to correct,” said KGI’s Kwong.
Mainland developers dropped even after data today showed new home prices in the nation’s four major cities rose the most last month since January 2011, led by Guangzhou. Prices climbed in 69 of 70 cities the government tracked last month from a year earlier, the National Bureau of Statistics said in a statement.
While Chinese developers sank, their Hong Kong counterparts rose. Expectation for a moderate tapering of Fed bond purchases eases pressure on the city’s interest rates, which track the U.S., Kwong said. Builders accounted for at least half of the top 10 gains on the Hang Seng Index.
Cheung Kong climbed 3.1 percent to HK$120. The company’s risk-reward profile has become more attractive, CLSA analyst Jonathan Galligan wrote in a report dated yesterday, reiterating his buy rating on the stock.
New World Development Co. (17), a builder controlled by billionaire Cheng Yu-tung, gained 2.6 percent to HK$11.98. Henderson Land Development Co. rose 1.2 percent to HK$47.65.
Solar shares gained after the Ministry of Industry said it will ban construction of plants built solely to boost capacity. GCL-Poly Energy Holdings Ltd. (3800), the world’s biggest producer of polysilicon for solar panels, climbed 1.4 percent to HK$2.12. Hanergy Solar Group Ltd. (566), a Beijing-based renewable-energy producer, jumped 5.8 percent to 91 Hong Kong cents.
A global oversupply of solar panels, of which China is the biggest producer, led to a 20 percent plunge in prices last year, according to data compiled by Bloomberg. Chinese authorities have pledged to cut overcapacity in industries from steel to paper as policy makers seek to reduce the economy’s reliance on investments and exports.
Futures on the Hang Seng Index were little changed at 23,200. The HSI Volatility Index rose 0.8 percent to 17.41, indicating traders expect the benchmark equity index to swing 5 percent in the next 30 days.
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