Hong Kong Stocks Fall as Gold Slides, Sinopec Retreats

Hong Kong stocks fell, with a gauge of China shares retreating after the biggest weekly gain in two years as China Petroleum & Chemical Corp., also known as Sinopec, led declines in energy shares after a pipeline blast.

Sinopec sank 2.6 percent after saying operations at a refinery will be disrupted after the explosion. Energy producers fell most among the Hang Seng Composite Index’s 11 industry groups. Zhaojin Mining Industry Co., China’s second-largest gold producer, slid 2.2 percent as bullion prices fell after a nuclear accord with Iran tempered demand for haven assets. Tencent Holdings Ltd. (700) rose 3.2 percent after Asia’s largest Internet company signed a deal with Sinolink Securities Co. to provide online wealth management services.

The Hang Seng China Enterprises Index (HSCEI), also known as the H-share index, lost 0.5 percent to 11,387.21 at the close in Hong Kong after last week capping its biggest weekly advance since December 2011. The Hang Seng Index (HSI) closed little changed at 23,684.45, having swung between gains of as much as 0.6 percent earlier and a loss of 0.1 percent. More than two shares fell for each that rose on the 50-member gauge. Last week China outlined its broadest slate of reforms since the 1990s.

“The policies announced last week will have a long-term impact on the Hong Kong stock market, but the overall related stocks seem to have overreacted,” Castor Pang, head of research at Core Pacific-Yamaichi Hong Kong Ltd. “We’re seeing a consolidation for those stocks now.”

Relative Value

The Hang Seng Index rose 20 percent from its June 24 low, taking valuations to 11.35 times estimated earnings, compared with 16.3 for the Standard & Poor’s 500 Index on Nov. 22. The H-share index climbed 28 percent from this year’s low on June 25 on signs of recovery in China and after policy makers unveiled the economic agenda.

“There are no new catalysts to drive the market higher,” Andrew Sullivan, director of sales trading at Kim Eng Securities in Hong Kong, said by phone. “The reforms in China are going to take a little while to execute. There are no quick fixes.”

Futures on the S&P 500 gained 0.3 percent today after last week closing at a record high and capping a seventh week of gains. The Dow Jones Industrial Average also rose a seventh week, completing its longest streak of weekly advances since January 2011.

Sinopec slipped 2.6 percent to HK$6.83. Production at the Qindao refinery, which produces 10 million metric tons of oil products annually, will have “some disruptions,” Lv Dapeng, a Beijing-based spokesman for the company, said in a phone interview yesterday. A pipeline explosion at the facility over the weekend killed at least 55 people. PetroChina Co., the nation’s biggest energy producer, fell 1.1 percent to HK$9.32.

Iran Deal

Zhaojin Mining fell 2.2 percent to HK$5.26. Gold fell to the lowest level in more than four months as the accord between Iran and world powers damped demand for a haven, while holdings in exchange-traded products extended declines.

By agreeing to curtail its nuclear activities, Iran won an easing of certain sanctions on oil, auto parts, gold and precious metals for six months. The deal, which is reversible and could be worth $7 billion of relief of sanctions, was announced yesterday after five days of talks in Geneva.

Among stocks that advanced, Tencent Holdings climbed 3.2 percent to HK$438, the highest close since Oct. 22, after signing a strategic cooperation agreement with Sinolink Securities.

To contact the reporters on this story: Jonathan Burgos in Singapore at jburgos4@bloomberg.net; Jasmine Ng in Singapore at jng299@bloomberg.net

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

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