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Hong Kong Stocks Retreat From Four-Month High on China

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Sept. 18 (Bloomberg) -- Hong Kong stocks fell, with the city’s benchmark index retreating from a four-month high, amid speculation China’s central bank may seek to control inflation rather than boost growth.

Aluminum Corp. of China Ltd., the country’s biggest producer of the metal, slipped 3.6 percent. Dongfeng Motor Group Co. led partners of Japanese carmakers lower, dropping 5.1 percent as factories were closed amid protests spurred by a territorial dispute between the two countries. Shandong Weigao Group Medical Polymer Co., a medical-equipment maker, jumped 7.5 percent as China plans to boost spending on health care.

The Hang Seng Index fell 0.3 percent to 20,601.93 at the close after rising as much as 0.3 percent. Three shares fell for every two that rose on the gauge. The measure yesterday closed at its highest since May 4 after the Federal Reserve last week announced a third round of quantitative easing, buying mortgage-backed securities to boost U.S. growth.

“China probably won’t ease monetary policy at the moment,” said Castor Pang, head of research at Core-Pacific Yamaichi International Ltd. in Hong Kong. “Quantitative easing by the U.S. will drive commodity prices and that would increase inflation pressures in China.”

The Hang Seng China Enterprises Index of mainland companies slid 1 percent to 9,683.89. The volume of shares traded on the benchmark Hang Seng Index was 0.1 percent higher than the 30-day average, according to data compiled by Bloomberg.

China’s economic difficulties may continue for “a period of time” due to Europe’s debt crisis and a weak U.S. economy, according to a commentary published by the official Xinhua News Agency. New home prices rose in fewer Chinese cities in August, adding to signs growth is slowing.

Inflation Focus

The People’s Bank of China is focusing more on keeping “overall price levels basically stable,” it said yesterday in Beijing. Inflation that accelerated in August for the first time in five months may limit further easing after the central bank cut rates in June and July, Core-Pacific Yamaichi’s Pang said.

The Hang Seng Index traded at 10.9 times estimated earnings yesterday, compared with 9.5 for the Shanghai Composite Index and 14.1 for the Standard & Poor’s 500 Index. The Hong Kong gauge climbed 14 percent from this year’s low on June 4 through yesterday as central banks announced more measures to stimulate global economic growth.

Raw material producers dropped after a gauge of six industrial metals from aluminum to copper slipped 0.8 percent yesterday, snapping a six-day rally. Aluminum Corp. of China slipped 3.6 percent to HK$3.21. Jiangxi Copper Co., the mainland’s biggest producer of the metal, fell 2.3 percent to HK$19.20.

Cnooc Bid

Cnooc Ltd., China’s largest offshore oil producer, decreased 1.4 percent to HK$16.02. The Canadian government is closely reviewing Cnooc’s bid for Calgary-based energy company Nexen Inc. as a lawmaker said there are concerns within the governing party about the transaction, according to Canadian Industry Minister Christian Paradis.

Chinese partners of Japanese car makers fell amid an escalating diplomatic crisis between the countries after Japan’s cabinet approved the purchase of islands that China also claims as its territory. Thousands marched in more than a dozen Chinese cities over the weekend and Toyota Motor Corp., Honda Motor Co. and Nissan Motor Co. halted production at some plants.

Dongfeng Motor, a Nissan partner, sank 5.1 percent to HK$9.13. Guangzhou Automobile Group Co., which gets more than 80 percent of sales revenue from Toyota and Honda vehicles, slid 1.8 percent to HK$5.36.

Health Spending

Among stocks that gained, Shandong Weigao climbed 7.5 percent to HK$9.72. China’s health ministry, which manages rural residents’ health insurance program, plans to expand per-capita funding to at least 360 yuan ($57) by 2015, from 300 yuan this year, it said in a statement issued at the briefing. The program covered 812 million people, or 95 percent of the rural population, as June 30, according to ministry figures.

Futures on the Hang Seng Index lost 0.4 percent to 20,633 today. The HSI Volatility Index dropped 0.5 percent to 17.72, indicating traders expect a swing of 5.1 percent for the equity benchmark in the next 30 days.

To contact the reporter on this story: Jonathan Burgos in Singapore at jburgos4@bloomberg.net

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

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