Hong Kong H-Shares Set for One-Month Low on China Exports

Hong Kong stocks declined, with a gauge of Chinese shares poised for a one-month low, as weaker-than-estimated trade data fueled concern that the world’s second-largest economy would fail to meet its growth target.

The Hang Seng Index fell 1.4 percent to 22,339.76 as of 9:32 a.m. in Hong Kong after retreating 0.8 percent last week. The Hang Seng China Enterprises Index of mainland shares traded in the city slid 1.4 percent to 9,572.82, extending last week’s 1.8 percent decline.

“The trade data was quite weak,” David Gaud, a money manager who helps oversee about $120 billion at Edmond de Rothschild Asset Management, said in a Bloomberg TV interview. “Based on what we’ve been given so far this year on the macro numbers in China, you are not able to get to 7.5 percent growth at the end of the year, meaning you’re going to need fiscal stimulus. You’re going to see monetary policy that is going to have to be loosened and that could be the major surprise in China.”

Mainland exports unexpectedly slid 18.1 percent in February from a year earlier, the most since 2009, compared with analysts’ estimates for a 7.5 percent increase, according to a March 8 government report. Inflation eased to a 13-month low. China last week retained a target for 7.5 percent growth in 2014 for the $9 trillion economy. Gross domestic product expanded 7.7 percent in 2013, the same pace as in 2012.

Goldman Sachs Group Inc. is sticking with its recommendation to buy Chinese stocks, the biggest decliners worldwide this year, after valuations fell to the lowest level in a decade compared with global peers.

Kinger Lau, a strategist at Goldman Sachs, predicts the Hang Seng China Enterprises Index will climb 24 percent to 12,000 in the next 12 months. The brokerage’s December forecast was for a rise to 13,600 by the end of 2014.

Relative Value

The Hang Seng China Enterprises Index traded at 6.5 times estimated earnings and the Hang Seng Index (HSI) had a multiple of 10.2 as of March 7, compared with 16 for the Standard & Poor’s 500 Index and 14.5 for the Stoxx Europe 600 Index, according to data compiled by Bloomberg.

China’s leaders are trying to balance clampdowns on the shadow-banking industry and local-government debt with measures to support growth in the world’s second-largest economy. Investors are watching the ongoing People’s National Congress for further signs of reform. Shanghai Chaori Solar Energy Science & Technology Co. became the first onshore company to default on a bond after failing to make a full-interest payment last week.

Futures on the S&P 500 slid 0.2 percent, indicating the U.S. equities benchmark will retreat from a record high when trading starts in New York. U.S. shares rose last week as data showing stronger-than-forecast jobs growth overshadowed concern the situation in Ukraine could worsen.

To contact the reporter on this story: Adam Haigh in Sydney at ahaigh1@bloomberg.net

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

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