Hong Kong Stocks Fall on U.S. Data, Sun Hung Kai Arrest

Hong Kong stocks extended yesterday’s losses after U.S. service industries expanded less than expected. Developers led declines after another arrest was announced in the Sun Hung Kai Properties Ltd. graft investigation.

China Cosco Holdings Ltd., a shipping line that gets 15 percent of its revenue from the U.S., fell 2 percent. Esprit Holdings Ltd., a clothier that gets about 80 percent of sales in Europe, dropped 5.5 percent after the European Central Bank said the region was subject to downside risks. Sun Hung Kai Properties fell 1.8 percent after announcing former Chairman Walter Kwok’s arrest.

“It’s another stare into the job market -- it indicates that employers are going to be reticent about hiring people,” Andrew Sullivan, principal trader at Piper Jaffray in Hong Kong, said of the U.S. services industry data. “I think people are concerned that the growth is lackluster at the moment.”

The Hang Seng Index fell 0.8 percent to 21,086 at the close in Hong Kong. The benchmark gained 1.7 percent on the week, erasing last week’s 1.3 percent loss. Trading volume was 14 percent below the 30-day average. The Hang Seng China Enterprises Index of mainland companies retreated 1 percent to 10,882,18.

The benchmark Hang Seng has fallen about 2.7 percent from this year’s peak on Feb. 29 as China targeted the slowest economic growth since 2005 and on signs the U.S. recovery may be slowing.

U.S. Worries

Futures on the Standard & Poor’s 500 Index were little changed. The gauge fell 0.8 percent yesterday after a report service industries in the U.S. expanded less than projected. The Institute for Supply Management said its non-manufacturing index fell to a four-month low of 53.5 in April, missing an estimate of 55.3 from economists surveyed by Bloomberg News.

China Cosco Holdings Ltd., China’s biggest shipping company, fell 2 percent to HK$4.50. Yue Yuen Industrial (Holdings) Ltd., a maker of shoes for Nike Inc., fell 0.6 percent to HK$26.55.

Hong Kong stocks linked to Europe fell as European Central Bank President ECB President Mario Draghi said he would not immediately enact any stimulus policies despite a negative outlook for the region. The ECB held its interest rate at 1 percent.

Esprit Holdings dropped 5.5 percent to HK$14.82. China Rongsheng Heavy Industries Group Holdings Ltd., a shipmaker that gets about a third of its revenue from Greece and Germany, slid 2.5 percent to HK$1.96.

Sun Hung Kai

Developers dropped after Sun Hung Kai Properties, the city’s biggest property company, suspended trading today from 9 a.m. to noon. It announced during the midday break that former Chairman Walter Kwok had been arrested as part of a corruption probe in which his brothers, Thomas and Raymond, were taken into custody on March 29. The stock has fallen 17 percent since the earlier arrests.

The latest arrest was “in connection with an investigation into an offence or offences suspected to have been committed” under the city’s anti-bribery law, Sun Hung Kai said in a statement today. The developer fell 1.8 percent to HK$92.60 after resuming trading.

Other property companies followed as Hang Lung Properties Ltd. dropped 1.6 percent to HK$28.20. Wharf (Holdings) Ltd., owner of two of Hong Kong’s largest malls, fell 1.7 percent to $45.85.

The investigation has increased public concern about real estate policies as price gains made Hong Kong the world’s most expensive place to own a home.

Commodity Stocks

Prices of copper, aluminum and oil all declined, leading resources companies down. Aluminum Corp. of China Ltd., the nation’s biggest producer of the metal, dropped 3 percent to HK$3.62. Jiangxi Copper Co. retreated 1.7 percent to HK$18.92. China Oilfield Services Ltd., the drilling unit of the nation’s largest offshore crude producer, slid 3.1 percent to HK$12.04.

Hang Seng futures expiring this month fell 1 percent to 20,888. The HSI Volatility Index was gained 1.5 percent to 18.79, indicating traders expect a swing of about 5.4 percent in the benchmark index during the next 30 days.

Companies on the Hang Seng trade at an average of about 10.7 times estimated earnings, up from 10 times on Dec. 30 while the S&P 500 trades at 13.3 times, according to Bloomberg data.

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