Hong Kong Stocks Slide Before Holidays; Li & Fung Slumps

Hong Kong stocks fell, with the benchmark index parings its biggest monthly advance in a year, ahead of China’s seven-day holiday next week. Li & Fung (494) sank after Wal-Mart Stores Inc. said it will cut orders.

New World Development Ltd., the homebuilder controlled by the family of Hong Kong billionaire Cheng Yu-tung, slipped 1.2 percent after posting earnings that missed estimates. Finsoft (8018) Corp., a maker of financial trading software, surged 538 percent on its first trading day, the best Hong Kong debut since October 1996. Retail supplier Li & Fung dropped 3.1 percent.

The Hang Seng Index slipped 0.4 percent to 23,125.03 at the close, with about three shares falling for every two that rose on the gauge. Trading volume was 12 percent below the 30-day average ahead of the National Day break starting Oct. 1. The Hang Seng China Enterprises Index (HSCEI), also known as the H-share index, declined 0.5 percent to 10,541.03.

“Investors are probably taking some money off the table ahead of the holidays in China next week since we’ve had a good run this month,” Jackson Wong, vice president of Hong Kong-based brokerage Tanrich Securities Co., said in a telephone interview. “Investors aren’t making big bets until the debt-ceiling debate in the U.S. is resolved. If an agreement cannot be reached, that could pose systemic risks.”

Futures on the S&P 500 rose 0.3 percent. The measure yesterday completed its longest slump this year as Wal-Mart retreated and concern grew that a political showdown over government spending poses a threat to growth. Congress is yet to pass a budget as lawmakers tussle over funding the 2010 health-care overhaul known as Obamacare. The lack of an agreement may spur a government shutdown Oct. 1.

Li & Fung

Li & Fung sank 3.1 percent to HK$11.42 even after the supplier of toys and clothes said Wal-Mart is continuing to place orders for 2014 as usual. Wal-Mart said it was cutting orders to suppliers this quarter and next to address rising inventory. the company flagged in last month’s earnings report.

The Hang Seng Index climbed 6.4 percent this month, poised for its biggest monthly advance since September 2012, after a gauge of China manufacturing rose to a six-month high and the Federal Reserve unexpectedly refrained from cutting stimulus. The equity benchmark traded at 11.1 times estimated earnings yesterday, compared with 15.4 for the Standard & Poor’s 500 Index. The H-share index entered a bull market this month after rebounding 20 percent from a June low.

China’s real gross domestic product could grow as much as 7.5 percent this year and beyond, a level that will become the “new normal,” Paul Gruenwald, Singapore-based Asia-Pacific chief economist at Standard & Poor’s, wrote in a report yesterday. The new leadership under Premier Li Keqiang and President Xi Jinping appears to accept the reality that growth is bound to slow, according to the report.

New World

New World slid 1.2 percent to HK$11.88. Underlying profit, which excludes property revaluation gains and deferred taxes, rose to HK$6.33 billion ($816 million) for the 12 months ended June 30 from HK$5.02 billion a year earlier, the company said in a statement today. That compares with the HK$6.59 billion average estimate of 14 analysts compiled by Bloomberg.

Among stocks that rose, Finsoft jumped 538 percent to HK$5.23 on its trading debut. The company offered 50 million shares at 82 Hong Kong cents each in its initial public offering.

The Fed said after its meeting last week that it wants to see more signs of strength in the labor market before paring its $85 billion of monthly asset purchases. The central bank is expected to wait until December before taking the first steps in slowing stimulus, according to 24 of 41 economists surveyed Sept. 18-19 by Bloomberg News.

Futures on the Hang Seng Index (HSI) fell 0.1 percent to 23,136. The HSI Volatility Index slipped 3.7 percent to 15.58, indicating that traders expect a 4.5 percent swing on the equity benchmark over the next 30 days.

To contact the reporter on this story: Jonathan Burgos in Singapore at jburgos4@bloomberg.net

To contact the editor responsible for this story: Sarah McDonald at smcdonald23@bloomberg.net

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