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Hong Kong Stocks Drop as China Earnings Raise Concern

March 29 (Bloomberg) -- Hong Kong’s Hang Seng Index fell to the lowest close in almost two months amid concern China’s economy is slowing as companies from PICC Property & Casualty Co. to China Shipping Container Lines Co. missed earnings estimates.

PICC dropped 3.9 percent after China’s largest non-life insurer said investment losses weighed on profit. China Shipping declined 2 percent after the nation’s second-biggest container carrier posted losses on higher fuel costs. Sun Hung Kai Properties Ltd., the world’s No. 1 developer by market value, suspended its shares from trading. Local broadcaster Cable TV reported that company chairmen Thomas and Raymond Kwok were asked to assist in a graft investigation.

Weaker earnings is “certainly a concern, and it’s consistent with other data out of China showing a slowdown,” said Shane Oliver, Sydney-based head of investment strategy at AMP Capital Investors Ltd., which manages almost $100 billion. “With all the good news being factored in, we are coming to a tougher period and markets are vulnerable to any bad news.”

The Hang Seng Index dropped 1.3 percent to 20,609.39 at 4 p.m. in Hong Kong, its lowest close since Feb. 1. Volume on the gauge was about 5.3 percent higher than the 30-day moving average, according to data compiled by Bloomberg. The Hang Seng China Enterprises Index of mainland companies dropped 1.6 percent to 10,532.98, declining for an 11th time in 12 days.

PICC sank 3.9 percent to HK$9.48, its lowest close since Oct. 21. Full-year profit rose 52 percent to 8.03 billion yuan ($1.27 billion), missing the 8.8 billion yuan median estimate of 16 analysts surveyed by Bloomberg, as the insurer booked a loss on stock investments.

Missed Estimates

Of the 273 companies on the Hang Seng Composite Index that reported annual results since Jan. 9, 53 percent trailed analysts’ profit estimates, according to data compiled by Bloomberg. Adding to signs of a slowdown, reports on China’s retail sales and industrial output missed estimates this month.

China Shipping slipped 2 percent to HK$2.52 today. The company reported a loss of 2.74 billion yuan last year, wider than the average estimate of 2.63 billion yuan by 16 analysts in a Bloomberg survey, amid rising fuel costs and declining demand.

China Merchants Holdings (International) Co., the port operator that moves about a third of the mainland’s shipping containers, dropped 2.7 percent to HK$25.75 after reporting a 5.2 percent fall in profit due to costs from a harbor deal.

Sun Hung Kai Suspension

Sun Hung Kai slipped 1.5 percent to HK$111.10 before it was suspended from trading this morning. Cable TV footage showed Raymond Kwok arriving today at the Independent Commission Against Corruption. The agency last week arrested Thomas Chan Kui-Yuen, an executive director at Sun Hang Kai, as part of a bribery investigation.

Futures on the Standard & Poor’s 500 Index added 0.1 percent today. The gauge lost 0.5 percent in New York yesterday after factory orders rose less than economists predicted. The data followed reports this month showing less-than-expected growth in manufacturing and a drop in consumer confidence amid higher gasoline prices.

Exporters to the U.S. dropped. Li & Fung Ltd., a supplier of toys and clothes to Wal-Mart Stores Inc., slipped 1.3 percent to HK$18.34. Techtronic Industries Co., the maker of Ryobi power tools that gets 73 percent of sales from North America, declined 1.9 percent to HK$10.12.

‘Softer Side’

“We are starting to see data come out on the softer side of what’s expected,” said AMP Capital’s Oliver. “Investors revised upward their expectations for global growth, but it’s harder now for economic data to beat those expectations.”

The Hang Seng Index climbed about 12 percent this year as signs the U.S. economy is recovering fueled confidence in the outlook for exports. The rally boosted the value of stocks on the gauge to 10.4 times estimated earnings. That compares with 13.5 times for the S&P 500 and 11.1 times for the Stoxx Europe 600 Index.

Futures on the Hang Seng Index expiring this month fell 1.4 percent to 20,614. The HSI Volatility Index climbed 7 percent to 20.19, indicating options traders expect a swing of about 5.8 percent in the benchmark index over the next 30 days.

To contact the reporter on this story: Jonathan Burgos in Singapore at jburgos4@bloomberg.net; Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net

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

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