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Hong Kong Stocks Fall as Banks Drop on China Tightening Concern

Nov. 26 (Bloomberg) -- Hong Kong’s Hang Seng Index fell, sending the index to its biggest weekly drop in almost five months, as banks and developers slid amid speculation that China will step up policies to curb inflation and as North Korea warned of war if its clash with the South escalated.

Industrial & Commercial Bank of China Ltd., the nation’s No. 1 lender by market value, sank 1.8 percent after the Shanghai Securities News said the government may cut the target for new lending next year. China Resources Land Ltd., a state-controlled developer, dropped 1.1 percent. Hong Kong developers also fell on concern government measures to curb property prices are slowing the real-estate market. China Modern Dairy Holdings Ltd., a milk producer, tumbled 13 percent on its first day of trading.

“The macro-economic condition isn’t that good with China’s monetary tightening concerns,” said Francis Lun, general manager at Fulbright Securities Ltd. Hong Kong’s “government measures to cool property prices are showing some effect, and developers are headed for a long decline.”

The Hang Seng Index fell 0.8 percent to 22,877.25 at the close, with all but five stocks declining on the 45-member gauge. The index fell 3.1 percent this week, the biggest weekly drop since the period ended July 2. The Hang Seng China Enterprises Index of so-called H shares of Chinese companies lost 1.4 percent to 12,757.10.

Declines deepened after the lunch break as North Korea warned that any “escalated confrontation” will lead to war, according to state news agency KCNA. The North is “greatly enraged at the provocation” from South Korea and it will retaliate to any encroachment of its sovereignty, the agency said in a statement e-mailed to news organizations.

Banks Drop

ICBC slid 1.8 percent to HK$5.92, while China Construction Bank Corp., the second-biggest lender by market value, slid 1.3 percent to HK$6.96. They were the two biggest drags on the Hang Seng Index. Bank of China Ltd. lost 1 percent to HK$4.12 and was the most actively traded stock by volume in the index.

A measure of property developers had the second-steepest decline in the Hang Seng Index after banks. China Resources Land dropped 1.1 percent to HK$14.04, and China Overseas Land & Investment Ltd., controlled by the nation’s construction ministry, fell 1.6 percent to HK$15.22.

China’s target for new loans next year will likely be close to 7 trillion yuan ($1.05 trillion), less than this year’s 7.5 trillion yuan, Shanghai Securities News reported, citing an unidentified person.

Hong Kong Developers

The Hang Seng Index has been posting weekly declines since the period ended Nov. 5 as Hong Kong and mainland Chinese government measures to curb inflation and property prices weighed on banks and developers. Shares in the gauge trade at an average 14.4 times estimated earnings, compared with about 17.2 times at the start of the year.

Hong Kong-based developers also declined on concern government measures to curb property prices are slowing the real-estate market.

Hang Lung Properties Ltd., which receives about 84 percent of its revenue from Hong Kong, retreated 0.9 percent to HK$34.70, while Henderson Land Development Co., a builder controlled by billionaire Lee Shau-kee, slid 0.6 percent to HK$54.50.

About 40 would-be buyers in Hong Kong’s second-hand-property market have forfeited down payments after canceling the transactions following the government’s imposition of increased stamp duties and higher deposits on some residential properties to curb rising prices, the Hong Kong Economic Journal reported today, citing unidentified people in the industry.

Property stocks as a group have tumbled 4.2 percent this month through yesterday, compared with a 0.2 percent drop for the Hang Seng Index, amid government measures to prevent a real-estate price bubble.

China Modern Dairy Holdings tumbled 13 percent to HK$2.51 on its first day of trading. The company sold 1.2 billion shares, raising HK$2.2 billion ($283 million) in a sale managed by Citigroup Inc. and UBS AG.

Futures on the Hang Seng Index slid 0.8 percent to 22,860.

To contact the reporter on this story: Kana Nishizawa in Tokyo at knishizawa5@bloomberg.net.

To contact the editor responsible for this story: Nick Gentle at ngentle2@bloomberg.net.

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