Hong Kong Stocks Fall as Oil Stocks’ Drop Temper China Optimism

Hong Kong’s Hang Seng Index fell as oil producers declined on falling crude prices. Stocks erased earlier gains that came amid speculation China will take steps to boost growth as mainland inflation cools.

Cnooc Ltd., China’s No. 1 offshore oil producer, sank 2.3 percent. Belle International Holdings Ltd., which makes women’s shoes and leather products, sank 6.1 percent after HSBC Holdings Plc cut its rating on the stock to “neutral.” Shimao Property Holdings Ltd., a developer that earns all of its revenue on the mainland, rose 3 percent after a report showed price gains slowed for a fifth month in China.

The Hang Seng Index retreated 0.3 percent to 19,095.38 at the close, after rising as much as 0.6 percent. The gauge rose 3 percent the past three days amid optimism about the U.S. economy and speculation China will take steps to support growth. The Hang Seng China Enterprises Index of mainland companies listed in Hong Kong was little changed at 10,519.21.

“Short-term traders are taking profit right now, limiting the market’s gains,” said Francis Lun, managing director at Lyncean Holdings Ltd. “China’s inflation figure gives policy makers more space to manipulate the monetary and fiscal policy,” which is positive for the market.

The Hang Seng Index tumbled 20 percent last year amid concern China would continue to curb lending and Europe would fail to resolve its debt crisis. Companies in the gauge traded at 9.7 times forecast earnings at the last close, down from 14.4 times at the beginning of 2011, according to data compiled by Bloomberg. The Standard & Poor’s 500 Index traded at 12.3 times.

Energy Companies Fall

A measure of energy companies had the biggest drop among the Hang Seng Composite’s 11 industry groups. Cnooc slid 2.3 percent to HK$15.02 and PetroChina Co., a mainland crude producer, declined 1.1 percent to HK$10.78. Crude for February delivery declined 1.3 percent to settle at $100.87 a barrel in New York yesterday.

Belle International sank 6.1 percent to HK$12.74 after HSBC cut its rating on the stock to “neutral” from “overweight” and reduced its price target to HK$14.30 from HK$19.60. CLP Holdings Ltd., an electricity supplier, retreated 1.6 percent to HK$64.85 after Sanford C. Bernstein & Co. cut its rating to “underperform” from “market perform.”

Shimao Property gained 3 percent to HK$6.87, while China Resources Land Ltd., a state-owned developer, advanced 0.6 percent to HK$12.88. Agricultural Bank of China Ltd., the nation’s third-biggest lender by market value, rose 0.9 percent to HK$3.56.

China Inflation

China’s inflation cooled for a fifth month in December, rising 4.1 percent from a year earlier, the National Bureau of Statistics said in Beijing today. That compares with the median estimate of 4 percent in a Bloomberg News survey of 26 economists and 4.2 percent in November.

“Slowing inflation is positive news and that allows the government to further relax tightening policies and add more liquidity to the economy and the stock market,” said Zhang Ling, general manager at Shanghai River Fund Management Co.

GCL-Poly Energy Holdings Ltd., a maker of polysilicon used in solar panels, surged 14 percent to HK$2.49 on optimism that stronger-than-expected demand will continue this year. Surging installations in Germany and the U.K., plus China’s plans to double capacity this year, are boosting demand for solar panels, said Aaron Chew, a Maxim Group LLC analyst in New York.

Germany installed 3 gigawatts of solar power capacity in December, the most in a single month, the country’s grid regulator said Jan. 9.

Sa Sa International Holdings Ltd., a cosmetics retailer, surged 10 percent to HK$4.74 after sales in the three months ended Dec. 31 climbed 29 percent from a year earlier.

Futures on the Hang Seng Index retreated 0.3 percent to 19,115. The HSI Volatility Index sank 1.6 percent to 22.41 today, indicating options traders expect a swing of 6.4 percent in the benchmark over the next 30 days.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE