Hong Kong’s Hang Seng Declines Ahead of Demonstrations

Hong Kong’s benchmark index reversed gains in late trading ahead of a holiday when pro-democracy demonstrations are planned. Chinese shares traded in the city rose before a report on the nation’s manufacturing due tomorrow.

Henderson Land Development Co., a Hong Kong builder controlled by billionaire Lee Shau-kee, fell 1.4 percent to lead the Hang Seng Index lower. Tencent Holdings Ltd. (700) lost 0.2 percent, erasing a gain of as much as 0.9 percent. Galaxy Entertainment Group Ltd. (27), controlled by billionaire Lui Che-woo, added 3.6 percent after Deutsche Bank AG said the worst is almost over for casino operators. China Telecom Corp. climbed 1.6 percent after being approved for a mixed fourth-generation network trial.

The Hang Seng Index slid 0.1 percent to 23,190.72 at the close in Hong Kong after rising as much as 0.5 percent. The Hang Seng China Enterprises Index, also known as the H-share index, climbed 0.3 percent to 10,335.03.

“There’s no reason but investors are making use of demonstration tomorrow as an excuse,” said Steven Leung, director of institutional sales at UOB-Kay Hian Holdings Ltd. in Hong Kong. “China PMI shouldn’t be too bad.”

Hong Kong’s markets are shut tomorrow for the anniversary of the city’s return to Chinese rule in 1997. The former British colony is bracing for a mass rally to support full universal suffrage and to oppose China’s insistence that it vet candidates for the city’s leadership election in 2017.

Henderson, Tencent

Henderson Land slid 1.4 percent to HK$45.35, while China Mengniu Dairy Co. dropped 1.4 percent to HK$35.85 to lead the benchmark index lower. Tencent, Asia’s biggest Internet company, lost 0.2 percent to HK$118.20.

The H-share index fell 4.5 percent in the first half as investors weighed whether China’s stimulus measures were enough to prop up flagging growth. The measure traded at 7.3 times estimated earnings, compared with 10.8 on the benchmark Hang Seng Index (HSI) and 16.6 for the Standard & Poor’s 500 Index yesterday.

China’s official gauge of factory activity will climb to 51 in June from 50.8 the month before, according to analyst estimates compiled by Bloomberg. The final reading of a purchasing managers’ index from HSBC Holdings Plc and Markit Economics is expected to rise to 50.8 from 49.4 in May. Levels above 50 indicate expansion.

Stimulus Measures

Recent reports showed China’s economy stabilizing as the central bank cut reserve ratios for some lenders, while the government outlined a package of spending including railway development.

“People are becoming more positive about China’s economy,” said Francis Lun, Hong Kong-based chief executive officer at Geo Securities Ltd.

Galaxy rose 3.6 percent to HK$62. MGM China Holdings Ltd. (2282), a casino operator controlled by MGM Resorts International, climbed 3.9 percent to HK$26.90. Gross gaming revenue growth will recover from an expected 2 percent to 5 percent decline in June, Deutsche Bank wrote in a note.

China Telecom gained 1.6 percent to HK$3.79. China Unicom (Hong Kong) Ltd., which also won approval for mixed 4G network trial, advanced 0.8 percent to HK$11.98.

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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