Most Hong Kong stocks fell after Citigroup Inc. cut its forecast for economic growth in China next year, overshadowing optimism that stimulus measures by the Federal Reserve will boost U.S. demand for Asian exports.
China Resources Land Ltd., a state-controlled developer, slid 3.4 percent amid concern China will refrain from easing measures to prevent inflation. Guangzhou Automobile Group Co., a Chinese partner of Toyota Motor Corp. and Honda Motor Co., fell 4.6 percent amid escalating anti-Japan protests in China. Hong Kong Exchanges & Clearing Ltd., the world’s second-largest bourse operator by market value, rose 2.5 percent after JPMorgan Chase & Co. raised its rating on the stock.
About 10 stocks fell for every seven that gained on the Hang Seng Composite Index. The Hang Seng Index gained 0.1 percent to 20,658.11 at the close, after swinging between gains and losses at least 15 times.The Hang Seng China Enterprises Index of mainland companies, also known as the H-share index, declined 0.5 percent to 9,780.92.
The Fed’s stimulus measures were “discounted a lot on Friday, so you can’t expect the market to continue to go much higher because there is some profit taking,” said Alex Wong, asset-management director at Ample Asset Management Ltd. in Hong Kong. Markets around the world rallied last week on the Fed’s plan to buy mortgage securities to boost growth in the world’s biggest economy, known as a third round of quantitative easing.
Volume on the Hang Seng Index was 7.6 percent above its 30-day average, according to data compiled by Bloomberg.
“The overall sentiment remains positive in the meantime,” Wong said. “People are not very bullish on China because the operating environment for many enterprises isn’t very good. The QE3 would reduce the chance for China easing because of inflation worries.”
The Hang Seng Index traded at 10.9 times estimated earnings on average on Sept. 14, compared with 9.7 for the Shanghai Composite Index and 14.1 for the Standard & Poor’s 500 Index. The Hong Kong gauge climbed 13 percent from this year’s low on June 4 through Sept. 14 as central banks announced more measures to stimulate global economic growth.
Citigroup cut China’s 2013 growth forecast to 7.6 percent from 8 percent on weakening external demand. Separately, China needs to be more cautious with its monetary policies as quantitative easing in the U.S. will create more pressure to control inflation, the official Xinhua News Agency reported, citing Lu Zhengwei, chief economist at Industrial Bank Co.
A measure of property developers was the only decline among the Hang Seng Index’s four industry groups. China Resources Land slumped 3.4 percent to HK$17, while Shimao Property Holdings Ltd., a developer that gets all its revenue from China, retreated 2.4 percent to HK$13.12.
China’s home sales declined 4.7 percent in the week ended Sept. 14 in the 58 cities tracked by CEBM Group, a Shanghai-based investment advisory co. That was compared with the previous week.
Guangzhou Automobile fell 4.6 percent to HK$5.46 on concern the carmaker will suffer as China boycotts Japanese cars. A joint venture with Toyota and Honda accounts for the majority of Guangzhou Auto’s total sales, Liang Yonghuo, an analyst at Haitong International Securities Group Ltd., wrote in a note.
Tensions between China and Japan escalated over the weekend after Japanese Prime Minister Yoshihiko Noda’s government said last week it would purchase disputed islands from their private Japanese owner, prompting China to dispatch government vessels near the islands.
Among stocks that rose, Hong Kong Exchanges & Clearing gained 2.5 percent to HK$120.90. JPMorgan raised its rating on the stock to overweight from neutral on expectations of recent volume momentum. The company has risen 19 percent through the last seven days.
The stock surged on Sept. 14 amid optimism that increased liquidity will boost trades on the exchange, particularly after the Fed’s stimulus plan, Alexander Lee, an analyst at DBS Vickers Hong Kong Ltd., said last week.
Metal producers advanced. Aluminum producer United Co. Rusal gained 2 percent to HK$4.67, while Mongolian Mining Corp. jumped 3.1 percent to HK$3.61. The London Metal Exchange Index of prices for six industrial commodities including copper and aluminum surged 4.3 percent on Sept. 14.
Cnooc Ltd., China’s largest offshore energy explorer, gained 3.7 percent to HK$16.24 and China Oilfield Services Ltd. rose 1.8 percent to HK$13.50 after oil for October delivery rose 0.7 percent in New York on Sept. 14.
Futures on the Standard & Poor’s 500 Index fell 0.2 percent today. The benchmark for U.S. equities ended last week at the highest level since December 2007 after the Federal Open Market Committee committed to buying bonds until the U.S. labor market recovers “substantially.” The central bank said it will expand its holdings of long-term securities with open-ended purchases of $40 billion of mortgage debt a month.
Futures on the Hang Seng Index rose 0.3 percent to 20,714 today. The HSI Volatility Index dropped 3.9 percent to 17.80, indicating traders expect a swing of 5.1 percent for the equity benchmark in the next 30 days.