Hong Kong Stocks Extend Declines as China Woes Fuel Rout

Hong Kong stocks fell, sending the benchmark index to the lowest level since August, amid growing concern that an economic slowdown in China will curb earnings.

China Coal Energy Co. (1898), the nation’s second-biggest miner of the fuel by market value, slumped 2 percent after saying 2013 profit probably tumbled. GCL-Poly Energy Holdings Ltd., a maker of polysilicon for solar panels, sank 6.3 percent after China set a lower-than-expected 2014 target for solar installed capacity. Pacific Basin Shipping Ltd. (2343), a dry-bulk ship operator, dropped 7.2 percent as a measure of industrials companies led drop on the Hang Seng Composite Index.

The Hang Seng Index (HSI) retreated 2.1 percent to 21,976.10, its lowest close since Aug. 30. All but two stocks on the 50-member gauge slid, with volume 56 percent higher than the 30-day average. The Hang Seng China Enterprises Index (HSCEI) of mainland Chinese companies, known as the H-share index, lost 2.2 percent to 9,792.58. In the U.S., the Federal Reserve reviews its record stimulus this week.

“The market is preparing for a slowdown of emerging markets and China,” said Tim Leung, a Hong Kong-based portfolio manager who helps oversee about $1.5 billion at IG Investment Ltd. “Ahead of the Fed meeting people will be questioning whether there will be a further increase in the amount of tapering, which everyone perceives as a further headwind for emerging markets.”

China Manufacturing

The Hang Seng Index sank 3 percent last week, the biggest weekly drop since June, as a private report on China’s manufacturing industry signaled factory output contracted this month The stock gauge traded at 9.9 times estimated earnings Jan. 24, the cheapest level since July. The H-share index tumbled 7.4 percent this year through last week, the steepest decline among global primary equity gauges tracked by Bloomberg.

Last week’s report from HSBC Holdings Plc and Markit Economics showed their Chinese manufacturing gauge fell to 49.6 in January from 50.5 in December, trailing the 50.3 median economist estimate. A reading under 50 signals contraction.

Futures on the Standard & Poor’s 500 Index added 0.3 percent after falling as much as 0.3 percent earlier. The gauge tumbled 2.1 percent Jan. 24, as a selloff in developing-nation currencies spurred concern global markets will become more volatile. The U.S. will release December home-sales data today.

Equity Decline

More than $940 billion has been erased from the value of emerging-market equities since the Federal Reserve signaled in May that it could start scaling back bond purchases that boosted demand for higher-yielding assets.

A measure of industrial companies had the biggest drop on the Hang Seng Composite Index. Pacific Basin tumbled 7.2 percent to HK$4.80, while CSR Corp., China’s biggest trainmaker, slumped 4.1 percent to HK$5.84.

China Coal dropped 2 percent to HK$3.93 after saying its profit last year may have slumped as much as 65 percent under Chinese accounting rules. GCL-Poly tumbled 6.3 percent to HK$2.53. China, the world’s biggest solar market, plans to add 10 gigawatts of solar power in 2014, the same as last year’s target, according to a National Energy Administration statement posted on Jan. 24. That’s less than the 14-gigawatt reported this month by state television, citing the need for the nation to quicken renewable energy development.

The U.S. central bank decided at its December meeting to start cutting its monthly bond purchases by $10 billion to $75 billion. Fed policy makers meet Jan. 28-29 and will probably cut another $10 billion from their monthly bond-buying program, according to the median estimate of economists surveyed by Bloomberg this month.

TCL Multimedia Technology Holdings Ltd. (1070), a television maker, jumped 11 percent to HK$3.63. The company will soon offer video-gaming device similar to Microsoft Corp.’s Xbox and also television designed for same purpose, Sina Corp.’s news service reported yesterday, citing Chief Executive Officer Hao Yi.

To contact the reporter on this story: Kana Nishizawa in Hong Kong at knishizawa5@bloomberg.net

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

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