Chinese Shares in Hong Kong Decline as Developers Slide

A gauge of Chinese shares traded in Hong Kong posted its biggest decline in six weeks amid concern a property-market slowdown will curb economic growth and as a slump in mainland-listed equities weighed on sentiment.

China Resources Land Ltd. dropped 3 percent, pacing losses among developers after UBS AG predicted broader declines in home prices. AAC Technologies Holdings Inc. (2018) slid 3.2 percent after Deutsche Bank AG downgraded the audio-component manufacturer. Belle International Holdings Ltd. gained 1.8 percent after Standard Chartered Plc said the shoe retailer was among its top picks in China.

The Hang Seng China Enterprises Index, also known as the H-share index, declined 0.9 percent to 10,354.06 at the close in Hong Kong, its biggest drop since May 7. The Hang Seng Index (HSI) lost 0.1 percent to 23,167.73, erasing gains of as much as 0.5 percent. The Shanghai Composite Index sank 1.6 percent on concerns new listings will divert funds.

“The mainland market fell quite a lot in the afternoon, dragging Hong Kong shares lower,” Steven Leung, director of institutional sales at UOB-Kay Hian Ltd. in Hong Kong, said by phone. “There’s no particular positive news to support the market. Investors are still concerned about the Chinese economy. Things will be improving but very slowly.”

A real-estate slump is adding to risks the nation will miss its 7.5 percent economic expansion target. New-home prices rose in May in just 15 of 70 cities tracked by the government, a statistics bureau report showed yesterday. Premier Li Keqiang said in a speech in London that China’s economy will avoid a hard landing, while limiting the scale of stimulus to support growth.

Targeted Stimulus

“Li’s speech shows the government isn’t going for comprehensive stimulus but will just target a few sectors -- it’s not optimistic for investors, so even if there’s a rebound in the short term, it will be temporary and small,” said Zhang Haidong, analyst at Tebon Securities Co., in Shanghai.

Chinese developers declined after UBS said more extensive property price cuts are expected in August and September as new housing projects are introduced. China’s real-estate downturn this time will be more prolonged than the last two corrections, Tom Byrne, a senior vice president at Moody’s, said at a conference in Shanghai today.

China Resources Land, which UBS downgraded to neutral from buy, dropped 3 percent to HK$14.24. China Overseas Land & Investment Ltd., the biggest mainland real estate company traded in Hong Kong, slid 2.6 percent to HK$19.52.

Relative Value

AAC Technologies declined 3.2 percent to HK$50.40. Deutsche Bank cuts its rating to hold from buy on the supplier of audio systems used in Apple Inc. devices

Hong Kong’s benchmark Hang Seng rebounded 9.4 percent since falling to an eight-month low in March, as manufacturing showed signs of recovery and China introduced stimulus to counter an economic slowdown. The gauge traded at 10.7 times estimated earnings, compared with 16.6 for the S&P 500 yesterday.

Futures on the Standard & Poor’s 500 Index added 0.1 percent. The underlying U.S. gauge reached an all-time high yesterday as the central bank said growth is bouncing back and repeated it will keep borrowing costs down for a “considerable time.” The Fed trimmed monthly bond buying to $35 billion from $45 billion, on pace to end the program late this year.

Airlines dropped as oil headed for its first advance this week amid fighting in Iraq. Air China Ltd., the nation’s biggest carrier by market value, decreased 2.2 percent to HK$4.48. China Southern Airlines Co. lost 1.3 percent to HK$2.34.

Belle rose 1.8 percent to HK$8.35. Shares of the women’s shoe retailer are among those that will benefit as the Chinese economy stabilizes next year, Standard Chartered said in a note data June 17.

Casino Recommendation

Casino stocks rebounded after Bank Julius Baer & Co. analyst Kelvin Wong said Macau gaming companies will outperform the benchmark Hang Seng Index as mass-market spending grows steadily. Sands China Ltd. rose 1.2 percent to HK$53.35, its first advance this week. Wynn Macau Ltd. jumped 4.1 percent to HK$28.20, snapping a four-day decline.

To contact the reporter on this story: Jonathan Burgos in Singapore at jburgos4@bloomberg.net

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

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