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Hong Kong Stocks Drop as Investers Wait for Stimulus

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Aug. 2 (Bloomberg) -- Hong Kong stocks fell for the first time in six days, snapping the longest win streak since January, on concern the government will take more steps to cool the housing market and as investors wait for further stimulus measures in U.S. and Europe.

China Shenhua Energy Co., the country’s biggest coal producer, fell 1 percent after Sanford C. Bernstein & Co. said prices for the fuel have yet to bottom. China Resources Land Ltd. slid 4.6 percent, leading a gauge of property stocks to the steepest drop among industry groups. China Yurun Food Group Ltd. jumped 19 percent after Kerry Group Ltd. disclosed it owns a stake in the meat-product supplier.

The Hang Seng Index retreated 0.7 percent to 19,690.90 at the close of trading, after rallying 5 percent in the past five days. Three shares fell for each one that rose on the 49-member gauge. Volume slid 13 percent compared with the 30-day average. The Hang Seng China Enterprises Index of mainland companies dropped 1 percent to 9,669.21.

“It seems that the market has gone too far, without the stimulus package announced by the Federal Reserve, the market has an excuse for a single day pull-back,” said Castor Pang, head of research at Core-Pacific Yamaichi International Ltd. in Hong Kong. “If they don’t announce interest-rate cuts in Europe, the short-term correction will become a major correction.”

The Hang Seng is down 9.2 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 index trades at 10.4 times estimated earnings, compared with 13.4 for the Standard & Poor’s 500 Index and 11.2 for Stoxx Europe 600 Index, according to data compiled by Bloomberg.

Coal Stocks

China Shenhua Energy fell 1 percent to HK$29. China Coal Energy Co., the second-largest coal producer, lost 0.7 percent to HK$7.31 after rising 14 percent in the last five days.

Michael Parker, a Hong Kong-based analyst at Sanford C. Bernstein, said prices of the fuel haven’t reached a bottom.

“There are, or will shortly be, hundreds of millions of tons of idled coal production capacity in China right now,” he wrote in an e-mailed research note today.

Cheung Kong (Holdings) Ltd., a Hong Kong property developer owned by Asia’s richest man Li Ka-shing, slid 1.1 percent to HK$102.30. After the market closed, Cheung Kong reported a first-half net profit of HK$15.5 billion, compared with the median estimate of HK$11 billion from five analysts surveyed by Bloomberg.

Wharf Holdings Ltd., a developer that gets two-thirds of its revenue in Hong Kong, lost 1.3 percent to HK$44.90. China Resources declined 4.6 percent to HK$14.82. A gauge of property stocks slid 1 percent, the most among five industry groups.

Property Curbs

Premier Wen Jiabao said the country will “unswervingly” implement property controls and prevent housing prices from rebounding, the official Xinhua News Agency reported this week, citing a government meeting held on July 26. The country’s home prices posted the biggest gain in more than a year last month, signaling a turning point for the nation’s property market, SouFun Holdings Ltd., the country’s biggest real estate website owner, said yesterday.

China sent eight teams to 16 provinces late in July to check on the implementation of its property curbs, according to a statement on the central government website last week.

Rising housing prices are “actually concerning the central government,” Jing Ulrich, managing director and chairman of global markets for China, said in a Bloomberg Television interview today. “They don’t want prices to rebound too sharply. After all, the housing issue is a social issue and not just an economic issue.”

Futures, Volatility

China Resources Enterprise Ltd. fell 1.8 percent to HK$21.55, after having risen 15 percent in the previous five days. Belle International Holdings Ltd., a retailer of women’s footwear that gets most its revenue from China, slid 2.9 percent to HK$14.04 after having jumped 11 percent in the past five days.

Futures on the Hang Seng Index retreated 0.8 percent to 19,630. The HSI Volatility Index gained 1.5 percent to 21.18, indicating traders expect a swing of about 6.1 percent in the benchmark index during the next 30 days.

China Yurun rose 19 percent to HK$5.51, its steepest gain since its 2005 listing after Kerry Group Ltd., controlled by billionaire Robert Kuok, disclosed it owns a 5 percent stake in the company.

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