Hong Kong Stocks Slip as Tencent Drags Index Lower

Hong Kong stocks slipped as Tencent Holdings Ltd. dragged the city’s benchmark index lower. Citic Pacific Ltd. (267) soared on a plan to buy its parent’s assets.

The Hang Seng Index (HSI) fell 0.1 percent to 21,875.05 as of 9:42 a.m. in Hong Kong. Tencent slumped 4.9 percent after agreeing to buy a $500 million stake in a South Korean game developer. The Hang Seng China Enterprises Index (HSCEI), also known as the H-share index, fluctuated after data showed mainland industrial profits increased 9.4 percent in the two months through February from a year earlier.

The H-share gauge rebounded 7 percent through yesterday since capping a 20 percent drop from a December peak on March 20 amid speculation China’s government is loosening funding restrictions for developers and banks, and as weaker economic data fueled optimism for stimulus. The index lost 8.9 percent this year through yesterday, dragging its price to book ratio to 1.1 times, compared with 2 for the MSCI All-Country World Index of developed and emerging shares.

Of 205 companies in the Hang Seng Composite Index that posted annual earnings this month and for which Bloomberg had estimates, almost half beat profit projections and half missed. Industrial & Commercial Bank of China Ltd., the nation’s largest lender, and China Cosco Holdings Co. are among companies scheduled to report earnings today.

Citic Pacific has signed a framework agreement to acquire Citic Group Corp.’s main operating unit, the company said yesterday. The unit, called Citic Ltd., has total shareholder equity of 225 billion yuan ($36 billion), Citic Pacific said, without providing a total value for the deal.

U.S. Futures

Futures on the Standard & Poor’s 500 Index added 0.1 percent. The gauge dropped 0.7 percent yesterday, with declines led by technology and commodity companies. Losses extended in the last hour as investors sold companies that have led the bull market.

President Barack Obama, speaking in Brussels, warned of consequences of complacency in Ukraine and said Russia’s actions must be met with condemnation. Ukraine and the International Monetary Fund are nearing the end of bailout talks today as the U.S. and its European allies warned they’ll further penalize Russia if it intensifies the crisis after annexing Crimea.

HSBC Holdings Plc’s U.S. unit was among banks that failed Federal Reserve stress tests, the central bank said in a statement yesterday. Analysts estimate that banks were planning to pay out about $75 billion in excess capital to reward shareholders and boost returns. This is the second straight year that the Fed has criticized the quality of some plans.

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

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

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