Hong Kong Stocks Retreat as Spain Bailout Optimism Fades

Hong Kong stocks fell, paring yesterday’s biggest rally in five months, as rising Spanish bond yields fueled speculation that a bailout for the nation’s banks won’t halt the spread of Europe’s debt crisis.

Cosco Pacific Ltd., which operates a port in Greece, fell 1.3 percent. Belle International Holdings Ltd., a women’s shoe retailer, slid 2.5 percent. China Resources Land Ltd., a state-controlled developer, led real estate companies higher after new lending in May surged beyond economists’ estimates.

“Investors have been feeling frustrated since last Thursday due to the choppy movement” of markets, Alex Wong, a director at Ample Capital Ltd., which oversees HK$1 billion ($129 million), said in a telephone interview. “On Monday, the market was bullish on Spain’s bailout news, but last night sentiment turned bad in the U.S. If you follow the market closely this week, you will get hurt.”

The Hang Seng Index slid 0.4 percent to 18,872.56 at the close, paring yesterday’s 2.4 percent gain. Almost two stocks fell for each that rose. The Hang Seng China Enterprises Index of mainland stocks dropped 0.6 percent to 9,519.53.

The benchmark gauge has retreated 13 percent from a Feb. 29 high amid increased concern that Europe’s debt crisis will spread beyond Greece at time when slower economic growth in the U.S. and China is also weighing on global demand.

Spanish bond yields surged the most in four months after the government sought a bailout of 100 billion euros ($125 billion) for its banks. European officials have struggled to control the debt crisis that began in Greece at the end of 2009. Investors are waiting on a Greek election on June 17 that could determine whether the nation remains in the euro.

‘Contagion Concern’

Cosco Pacific slid 1.3 percent to HK$9.86. HSBC Holdings Plc, Europe’s largest bank, retreated 0.8 percent to HK$64.35. Standard Chartered Plc, a London-based bank, slid 3.2 percent to HK$162.80.

“Contagion concern is still pretty much alive,” Eddie Tam, chief executive officer of Central Asset Investments, said on Bloomberg Television. “We’re staying on the sidelines at least until the Greek election results.”

Belle led declines among retailers, sliding 2.5 percent to HK$12.76. Li Ning Co., a sportswear retailer founded by the former Olympics gymnast of the same name, slumped 8.1 percent to HK$5.25 after projecting a “substantial” profit decline this year.

Developers advanced after the People’s Bank of China reported yesterday that the nation’s new loans in May exceeded analysts’ estimates, signaling a rise in investment that could support economic growth.

China Resources Land climbed 2.2 percent to HK$15.66. China Overseas Land & Investment Ltd. increased 1.4 percent to HK$17.16. Evergrande Real Estate Group Ltd., a builder based in the southern city of Guangzhou, advanced 4 percent to HK$4.67.

China Southern

China Pharmaceutical Group Ltd. extended yesterday’s 17 percent gain, rising 6.8 percent to HK$1.88 after saying it may purchase an unnamed company.

China Southern Airlines, Asia’s biggest carrier by passengers, gained 6.7 percent to HK$3.45 after announcing plans to raise as much as 2 billion yuan ($314 million) selling new stock to its state-owned parent to pare debt.

Hang Seng Index futures expiring this month dropped 1.1 percent to 18,756. The HSI Volatility Index gained 2.9 percent to 26.67, indicating traders expect a swing of 7.6 percent in the benchmark index during the next 30 days.