Hong Kong Stocks Post Biggest Weekly Drop in Two Months

Hong Kong stocks fell, with the city’s benchmark index capping its biggest weekly decline in two months, as utilities retreated.

China Resources Power Holdings Co. dropped 3.9 percent after rallying yesterday on a report the government will encourage private investment in the power-distribution sector. AAC Technologies Holdings Inc. (2018) fell 4.9 percent after the supplier of acoustic components to Apple Inc. was downgraded at BNP Paribas SA. Shares of HyComm Wireless Ltd. more than doubled after China Qingdao International Holding Co. offered to buy the text-messaging service.

The Hang Seng Index slid less than 0.1 percent to 23,233.45 at the close in Hong Kong after rising as much as 0.3 percent. The gauge decreased 1.3 percent this week, the biggest such drop since the period ended May 9. The Hang Seng China Enterprises Index, also known as the H-share index, added 0.1 percent to 10,379.61. Global shares slid overnight amid concern about financial risks in Europe.

“Markets are using the European situation as an excuse to sell equities,” Desmond Chua, a strategist at CMC Markets in Singapore, said by phone. “Fears of a contagion in Europe appear overblown.”

The Hang Seng Index (HSI) slid 0.3 percent this year, paring losses amid signs the economy is stabilizing as China rolls out targeted stimulus measures including reserve-ratio cuts. The gauge traded at 10.8 times estimated earnings at the last close, compared with 16.6 for the Standard & Poor’s 500 Index.

Europe Concern

The Stoxx Europe 600 Index fell to a two-month low yesterday. Banco Espirito Santo SA, Portugal’s second-biggest bank by market value, said it has exposure of 1.18 billion euros ($1.6 billion) to companies of Grupo Espirito Santo and is waiting to assess any potential losses after one of the group’s companies missed some short-term debt payments. The lender’s stock dropped more than 17 percent yesterday before being suspended.

China Resources Power dropped 3.9 percent to HK$22 after climbing 3.2 percent yesterday. Datang International Power Generation Co. fell 1 percent to HK$3.90. Shares rose yesterday on a Shanghai Securities News report China’s government is planning private investment in the power-distribution sector, citing a draft reform plan.

AAC Technologies tumbled 4.9 percent to HK$47.55. BNP Paribas cut the company’s rating to hold from buy, saying most positives have been priced in and that investors should wait for the release of Apple’s iPhone 6 to spur momentum.

Trading Debuts

Ernest Borel Holdings Ltd. (1856) gained 3.3 percent to HK$3.10 as the watchmaker’s shares debuted. China Aircraft Leasing Group Holdings Ltd. (1848) slipped 1.1 percent to HK$5.47 on its first day of trading after rising as much as 3.1 percent. Hanbo Enterprises Holdings Ltd., an apparel supplier, closed unchanged at its initial public offering price of HK$0.52 after surging as much as 46 percent.

HyComm Wireless jumped 146 percent to HK$3.45. China Qingdao International plans to buy the rest of the company after acquiring about 57 percent stake for HK$428.7 million.

Futures on the S&P 500 added 0.2 percent today. The benchmark gauge slipped 0.4 percent yesterday as the situation in Portugal fueled demand for haven assets, extending a selloff triggered by concern U.S. stocks have risen too far, too fast.

The U.S. equity benchmark hasn’t posted a decline of 10 percent from a peak since 2011, and has not fallen by more than 1 percent on a closing basis since April. Raymond James & Associates Inc. this week said equities are vulnerable and Citigroup Inc. cited concerns for a “severe” pullback.

China’s government may next week announce the first state-controlled companies available for mixed-ownership trials, China Securities Journal reported, citing a person with knowledge of the matter that it didn’t identify.

Hong Kong’s de facto central bank bought $1.33 billion this week to maintain the city’s 31-year-old currency peg to the greenback as merger activity boosted demand for the local dollar.

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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