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Hong Kong Stocks Fall as Moody’s Cuts Fuel Europe Concern

July 24 (Bloomberg) -- Hong Kong stocks fell a second day after Moody’s Investors Service said it may cut Germany’s credit rating and a measure of French business confidence missed estimates.

Cnooc Ltd., China’s largest offshore energy explorer, fell 4 percent after agreeing to pay $15.1 billion for a Canadian oil group. China Railway Construction Corp., builder of more than half of the mainland’s modern rail system, rose 3.8 percent after signing about 20 billion yuan ($3.1 billion) in new contracts. The city’s markets were closed during morning trading as a typhoon skirted the city.

The Hang Seng Index lost 0.8 percent to 18,903.20 at the close of trading in Hong Kong, after rising as much as 0.4 percent. Almost four stocks fell for each that rose on the 49-member gauge. The Hang Seng China Enterprises Index of mainland companies fell 0.6 percent to 9,217.23.

“Investors are more cautious,” said Linus Yip, a Hong-based strategist at First Shanghai Securities. “They are waiting to see whether there will be more easing, not only in mainland China, but also globally.”

The Hang Seng Index has fallen 13 percent from this year’s high in February on signs Europe’s debt crisis is worsening while growth slows in China and the U.S. The drop cut the value of shares on the gauge to 9.9 times estimated earnings on average, compared with 13.1 for the Standard & Poor’s 500 Index and 10.6 for Stoxx Europe 600 Index.

China Manufacturing

Shares fell even after HSBC’s Flash China Manufacturing PMI rose to 49.5 in July from 48.2 in June. If the preliminary data is confirmed, it would be the highest reading since February. The People’s Bank of China has cut interest rates twice in the past two months and widened the discount on benchmark lending rates that banks can offer to clients.

In Europe, Moody’s lowered the Aaa credit rating outlooks for Germany, the Netherlands and Luxembourg, citing “rising uncertainty” about the region’s fiscal crisis. The cuts came after the first call for bailout aid by a Spanish region sent the nation’s borrowing costs surging, while Spain and Italy reinstated a ban on betting on stock declines.

Sentiment among French factory executives fell to 90, the lowest since early 2010, from a revised 91 in June. Economists expected a reading of 92, according to the median of 16 estimates gathered by Bloomberg News.

Cnooc fell 4 percent to HK$14.82 in its biggest fall since May 7 after agreeing to pay $15.1 billion for Canadian oil and gas explorer Nexen Inc., 20 percent above the value of the Calgary-based company’s total assets. It is the biggest overseas takeover by a Chinese company.

China Railway Construction rose 3.8 percent to HK$6.80 after signing 20 billion yuan in new contracts. China Railway Group Ltd. rose 2.7 percent to HK$3.37.

Futures on the Hang Seng Index fell 0.7 percent to 18,850. The HSI Volatility Index gained 2.3 percent to 22.70, indicating traders expect a swing of about 6.5 percent in the benchmark index during the next 30 days. The measure surged 18 percent yesterday, the most since May 7.

To contact the reporter on this story: Patrick Boehler in Hong Kong at pboehler@bloomberg.net

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

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