Hong Kong stocks fell after Moody’s Investors Service cut the European Union’s economic outlook and Societe Generale SA predicted weaker Chinese growth, which fueled speculation of more government stimulus.
Mainland companies retreated after Goldman Sachs Group Inc. lowered earnings forecasts for publicly-traded companies in the MSCI China Index. Li & Fung Ltd., a supplier of clothes and toys to retailers that gets more than 80 percent of sales from abroad, fell 2.9 percent. Mongolia Energy Corp., a mineral and energy explorer, slumped 4.5 percent after saying it expects a first-half loss.
The Hang Seng Index slid 0.7 percent to 19,429.91 at the close. The gauge has fallen five of the last seven trading days. Volume was 9.6 percent below its 30-day average. The Hang Seng China Enterprises Index of mainland companies dropped 1 percent to 9,195.78.
“Investors are waiting for further clues for monetary easing from Europe, the U.S. and China, and that’s keeping them on the sidelines,” said Ben Kwong, chief operating officer at KGI Asia Ltd., a Hong Kong-based brokerage. Central banks will probably introduce stimulus measures, but “whether they will be sufficient enough to satisfy investor expectation is another thing.”
The Hang Seng Index traded at 10.4 times estimated earnings on average yesterday, compared with 9.3 for the Shanghai Composite Index and 13.6 for the Standard & Poor’s 500 Index. The Hong Kong gauge climbed 7.6 percent from this year’s low on June 4 through yesterday on optimism central banks will ease monetary policy to boost slowing global economic growth.
Futures on the Standard & Poor’s 500 Index gained 0.2 percent today, with the equity market set to reopen after yesterday’s holiday.
Moody’s lowered the outlook on the EU’s Aaa long-term bond rating from stable, citing the risks to Germany, France, the U.K. and the Netherlands that account for about 45 percent of the group’s budget revenue.
While China will avoid a full-blown hard landing, a shift to a new consumer-led growth model will see a structurally weaker growth outlook, according to a report from Societe Generale. The brokerage lowered its forecast for China’s real gross domestic growth to 7.7 percent from 8.1 percent for 2012 and to 7.4 percent from 7.7 percent for 2013.
Profits for companies in the MSCI China Index may increase 1.8 percent this year and 8.6 percent in 2013, compared with previous growth estimates of 6 percent and 12.3 percent, Goldman analysts Helen Zhu and Timothy Moe wrote in a report dated yesterday. In a separate report, Citigroup Inc. said earnings may rebound in the second half of the year as the government further loosens policies.
Li & Fung retreated 2.9 percent to HK$11.92. The company’s mergers and acquisitions may not be enough to offset a slowdown in “organic” growth as it becomes more dependent on the U.S. and Europe, Michelle Cheng, an analyst at BNP Paribas SA, wrote in a report, rating the stock reduce in new coverage.
Mongolia Energy slumped 4.5 percent to 32 Hong Kong cents after saying it expects a “substantial” loss for the interim period ending Sept. 30 because of lower prices of coking coal and a sluggish market in China.
I-Cable Communications Ltd., a pay-TV system operator, surged 29 percent to 37.5 Hong Kong cents, the biggest advance in three years. Volume was 62 times the five-day average. City Telecom (HK) Ltd., a fixed telecommunications network services provider, fell 2.6 percent to HK$1.89 after jumping 5.4 percent yesterday. Hong Kong’s government is assessing applications from the companies for free-to-air television licenses in Hong Kong, according to a May statement.
Television Broadcasts Ltd., which is an existing license holder, sank 4 percent to HK$53.85. I-Cable Communications said today it is unaware of the reasons for the price move.
Futures on the Hang Seng Index retreated 0.5 percent to 19,319. The HSI Volatility Index slid 1.5 percent to 20.17, indicating traders expect a swing of 5.8 percent for the equity benchmark in the next 30 days.