The Hang Seng Index (HSI) fell 0.9 percent to 24,532.43 at the close in Hong Kong, its steepest drop since July 9, with trading volume 23 percent greater than its 30-day intraday average. The measure yesterday capped its best month since September 2012. The Hang Seng China Enterprises Index (HSCEI) of mainland shares traded in the city, also known as the H-share index, sank 1.3 percent to 10,982.65.
“We were at a very high level, which causes a snowballing effect during phases of decline,” said Alex Wong, asset-management director at Ample Capital Ltd., which manages about $150 million. “In Asia, if we see one or two exciting earnings we will stabilize again. Right now, people are cautious and nervous.”
China Overseas Grand Oceans Group Ltd. tumbled 8.6 percent after Citigroup Inc. cut its rating on the developer. SmarTone Telecommunications Holdings Ltd. (315) dropped 2 percent after saying it sees full-year net income sliding as much as 40 percent. Cheung Kong Holdings Ltd., a Hong Kong developer controlled by billionaire Li Ka-shing, retreated 4.7 percent after first-half profit excluding some items missed estimates.
An official gauge of the nation’s manufacturing industry released today rose to 51.7 in July from 51 the previous month. Analysts had expected an increase to 51.4. A final reading of factory activity from HSBC Holdings Plc and Markit Economics rose to an 18-month high of 51.7, while missing the preliminary figure of 52. Levels of 50 or higher signal expansion.
The H-share gauge entered a bull market this week after rising more than 20 percent from its March low. China’s economy began to show signs of strength as policy makers bolstered growth by accelerating infrastructure spending, cutting reserve requirements for some banks and loosening property curbs.
Futures on the Standard & Poor’s 500 Index slid 0.1 percent today. The U.S. benchmark index slumped 2 percent yesterday, while the Dow Jones Industrial Average fell 1.9 percent to erase the year’s gains as Exxon Mobil Corp. to Micron Technology Inc. tumbled amid weaker corporate results. The MSCI All-Country World Index sank 1.5 percent yesterday, the most since February.
Market volatility increased, with the Chicago Board Options Exchange Volatility Index (VIX), known as the VIX, surging 27 percent to the highest level since April 11 as concern grew that the improving U.S. economy may force the Federal Reserve to raise interest rates sooner than expected.
The Hang Seng Volatility Index rose 1 percent to 16.53 today, indicating traders expect the benchmark equity index to swing 4.7 percent in the next 30 days.
Property companies led declines on the Hang Seng Index, with China Overseas Land & Investment Ltd. (688) sliding 2.3 percent after yesterday’s 4.6 percent jump. China Overseas Grand tumbled 8.6 percent to HK$5.75 after Citigroup cuts its rating to sell from neutral and Nomura Holdings Inc. lowered it to reduce from neutral.
Cheung Kong fell 4.7 percent to HK$143.60 after its first-half profit excluding property revaluation and one-time gains missed analyst estimates. Sun Hung Kai Properties Ltd. (16), Hong Kong’s second-largest developer, retreated 2 percent to HK$115.50, and New World Development Co. slipped 1.4 percent to HK$9.69. Home sales fell 30 percent for five major developers in the city, the Hong Kong Economic Times reported, citing government data.
SmarTone dropped 2 percent to HK$11.04. The company said it expects full-year profit to plunge 35 percent to 40 percent from a year earlier as profit from handset business declines and operating expenses swell.
Galaxy Entertainment Group Ltd. (27), a casino operator controlled by billionaire Lui Che-woo, fell 2.4 percent to HK$64.40, while Wynn Macau Ltd., a unit of billionaire Steve Wynn’s gaming company, slid 1.8 percent to HK$32.65. Macau casino revenue dropped 3.6 percent from a year earlier, according to data published on the website of the city’s Gaming Inspection and Coordination Bureau today.
Hong Kong reported after markets closed yesterday that June retail sales by value contracted 6.9 percent from a year earlier, missing the median estimate for a 5.1 percent slump from economists surveyed by Bloomberg. Sales by volume fell 7.5 percent, more than the 4.8 percent drop predicted by analysts.
The Hang Seng Index traded at 11.4 times estimated earnings today, compared with multiples of 7.6 for the H-share measure and 16.2 for the S&P 500 yesterday.
Hong Kong’s de facto central bank bought $2.07 billion this week to stop the local currency from strengthening beyond its 31-year-old peg to the greenback. Share listings, dividends and mergers and acquisitions are driving demand, the Hong Kong Monetary Authority said July 26.
Guangzhou Baiyunshan Pharmaceutical Holdings Co. (874) jumped 8.1 percent to HK$26.80 after saying it will start production and sale of Viagra-like products once it wins regulatory approval.
Biostime International Holdings Ltd. (1112), a supplier of baby products, surged 9.5 percent to HK$38.80. The company might be an attractive takeover target for Danone, Bocom International Holdings Co. said in a report.
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