Hong Kong Stocks Decline for Second Day Before China Data

Hong Kong stocks fell, with the benchmark index dropping for a second day, as investors weighed the latest round of Chinese stimulus measures and awaited economic reports due this week.

China Mengniu Dairy Co. (2319) led declines on the Hang Seng Index after Macquarie Group Ltd. downgraded the stock. Xinyi Glass Holdings Ltd. dropped 7.8 percent after saying it expects first-half profit to drop. Industrial & Commercial Bank of China Ltd. was the biggest drag on the city’s equity gauges after the lender’s shares traded without rights to the latest dividend.

The Hang Seng Index lost 0.4 percent to 23,175.02 at the close in Hong Kong, with trading volume 11 percent below the 30-day average. The Hang Seng China Enterprises Index of mainland shares, also known as the H-share index, slid 0.7 percent to 10,431.66. China is scheduled this week to release data on industrial production, retail sales and investment. U.S. and European stocks fell yesterday after the World Bank lowered its projection for global growth this year.

“Investors are taking a wait-and-see attitude before the release of Chinese economic data,” said Ayako Sera, a Tokyo-based market strategist at Sumitomo Mitsui Trust Bank Ltd. “U.S. and European equities were strong, so people took profits on news the World Bank cut its global economic growth forecasts. It’s hard for Hong Kong stocks to move higher without the strength of U.S. and European markets.”

Futures on the S&P 500 rose 0.1 percent today. The underlying gauge fell the most in three weeks yesterday, with the Dow Jones Industrial Average halting a five-day rally. The Stoxx Europe 600 Index declined 0.6 percent at the close of trading, its biggest loss since May 15.

Economic Support

China will boost public infrastructure investment and cut utilities’ taxes by about 24 billion yuan ($3.9 billion) a year, the State Council said yesterday. Falling imports last month underlined weak domestic demand that makes the nation more reliant on exports. Policy makers are seeking to build industries to replace real estate and manufacturing for export, while the People’s Bank of China yesterday encouraged more lending to exporters to boost shipments.

Data released after the close today showed that aggregate financing in May met estimates, falling to 1.4 trillion yuan from 1.55 trillion yuan the month before. New yuan loans rose to 870.8 billion yuan from 774.7 billion in the same span.

Hong Kong’s benchmark index has rebounded after falling as much as 9.1 percent this year as China introduced stimulus including reserve-ratio cuts for some banks after the economy expanded at the slowest pace since 2012 in the first quarter. The equity gauge traded at 10.7 times estimated earnings today, compared with 16.4 for the Standard & Poor’s 500 Index yesterday.

ICBC, China Mengniu

ICBC, Asia’s biggest lender by market value, fell 0.8 percent to HK$4.87 after the shares went ex-dividend. The stock was the biggest drag on the Hang Seng Index (HSI) and H-shares gauge.

China Mengniu fell 2.9 percent to HK$36.50 after Macquarie cut its rating to underperform from neutral. Xinyi Glass sank 7.8 percent to HK$4.73. The company said it expects first-half profit to decrease about 25 percent from a year earlier after the spinoff of Xinyi Solar Holdings Ltd., which jumped 7 percent today after saying first-half profit will double.

China Minsheng Banking Corp. (1988), the nation’s first non-state lender, climbed 3.3 percent to HK$6.92. Fosun International Ltd. led gains on the Hang Seng Composite Index, surging 7.7 percent to its highest since November 2007.

Weichai Power Co., a diesel-engine maker, suspended trading pending the release of inside information.

The World Bank on June 10 cut its global growth forecast to 2.8 percent growth for the world economy this year compared with a 3.2 percent estimate in January, paring the U.S. outlook to 2.1 percent from 2.8 percent. The forecast for China’s expansion was lowered to 7.6 percent from 7.7 percent, with the government’s official target at 7.5 percent.

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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