Chinese Shares in Hong Kong Retreat Before Mainland IPOs

A gauge of Chinese stocks listed in Hong Kong fell to a one-month low as phone companies and lenders slid amid concern the mainland’s first initial public offerings in four months will divert funds from existing shares.

China Telecom Corp. slipped 2.6 percent after Sina.com reported the government will grant more mobile-phone licenses. Agricultural Bank of China Ltd. slid 0.8 percent. China Huiyuan Juice Group Ltd. sank 9.4 percent after UBS AG recommended selling the stock. China Vanke Co. jumped 7 percent on its Hong Kong debut after the country’s biggest developer converted Shenzhen-listed shares to tap international investors.

The Hang Seng China Enterprises Index, also known as the H-share index, fell 0.7 percent to 10,180.05, the lowest close since May 27. The Hang Seng Index lost 0.1 percent to 22,866.70, reversing gains of as much as 0.3 percent.

“There’s no fresh catalyst for the market,” Jackson Wong, vice president at Tanrich Securities Co. in Hong Kong, said by phone. “Investor interest is probably being diverted from the market and into the upcoming listings in the mainland.”

The China Securities Regulatory Commission said 563.9 billion yuan ($91 billion) is locked up in six companies’ IPOs, a sign that a resumption of share sales tomorrow will shift funds from existing equities. Ten companies have started the process to list shares since June 10, the regulator said in its microblog yesterday.

Mainland Listings

Shandong Longda Meat Foodstuff Co., Wuxi Xuelang Environmental Technology Co. and Feitian Technologies Co. will start trading on the Shenzhen Stock Exchange tomorrow. They will be the first to list on the mainland since February.

The benchmark Hang Seng Index lost 1.9 percent this year, the second-biggest decline among developed equity markets tracked by Bloomberg, amid speculation China will miss its economic expansion target. The measure was valued at 10.6 times estimated earnings at the close, compared with 16.4 times for the Standard & Poor’s 500 Index yesterday.

Sina.com reported that the government will grant mobile-phone licences to at least seven companies within the next two weeks. China Telecom dropped 2.6 percent to HK$3.74. China Unicom (Hong Kong) Ltd. lost 0.7 percent to HK$11.62.

Mainland lenders fell. Agricultural Bank slid 0.8 percent to HK$3.40. Industrial & Commercial Bank of China Ltd., the nation’s biggest lender by market value, fell 0.6 percent to HK$4.81.

China Huiyuan Juice plunged 9.4 percent to HK$3.88, the lowest close since August. UBS cut its rating on the stock to sell from buy and reduced its price target to HK$3.34 from HK$5.21.

China Vanke

China Vanke (2202) rose to HK$13.28 on its first trading day after transferring its listing to Hong Kong, 7 percent higher than the last close on its mainland B-shares. The developer joined China International Marine Containers Group Co. in moving to Hong Kong as Shenzhen’s B-share market has languished. The conversion gives Vanke access to an exchange where the daily trading value is more than 100 times higher than in Shenzhen.

Futures on the S&P 500 were little changed. The underlying gauge slid 0.6 percent yesterday, erasing gains after a Wall Street Journal report that Syrian warplanes struck targets in Iraq. Shares rose earlier on a report that U.S. new home sales gained in May by the most in 22 years and after an index of consumer confidence reached its highest since 2008.

The Syrian Air Force killed at least 50 people in the western province of Anbar yesterday as foreign forces seek to beat back the insurgency, according to the Wall Street Journal. U.S. Secretary of State John Kerry was in Iraq seeking to prod the country’s leaders to unite against an al-Qaeda offshoot that has seized areas of OPEC’s second-biggest oil producer.

Home prices on the mainland may slide as much as 15 percent in top tier cities and the decline may last as long as 12 months, Harry Lu, president of IFM Investments, said yesterday. The Hang Seng Index tumbled by the most in three months to open the week amid concern falling property prices in China will weigh on growth.

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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