Hong Kong stocks fell, with the benchmark index dropping to a one-month low, amid concern that an impasse about cuts to the U.S. budget will crimp global growth and as China announced new leaders. Esprit Holdings Ltd. surged after the clothier’s former chairman more than doubled his stake.
The Hang Seng Index fell 1.6 percent to close at 21,108.93 in Hong Kong, the lowest since Oct. 11. Xi Jinping replaced Hu Jintao as head of the Chinese Communist Party, ushering in the fifth generation of leaders to run the world’s second-biggest economy. He also was named chairman of the party’s Central Military Commission. All but 13 stocks dropped on the 49-member gauge, which retreated 2.3 percent through yesterday after U.S. President Barack Obama was re-elected on Nov. 7. The Hang Seng China Enterprises Index of mainland companies listed in Hong Kong declined 2 percent to 10,199.60.
Li & Fung Ltd., a supplier of toys and clothes to Wal-Mart Stores Inc., slid 3.1 percent. Tencent Holdings Ltd., China’s biggest Internet company, dropped 7 percent the most on the Hang Seng Index after its third-quarter profit missed estimates. Esprit jumped 22 percent to a six-month high.
“A new leadership may be welcomed or not welcomed by the market, but the big picture is that China is in a complicated, challenging structural transformation,” said Mikio Kumada, a Singapore-based global strategist for LGT Capital Management, which oversees more than $20 billion. “Managing the transition toward a more domestic-driven economy is a process that will take some time.”
The benchmark Hang Seng Index advanced 18 percent from this year’s low on June 4 through yesterday as economic data showed China’s slowdown may be bottoming and central banks around the globe added stimulus to spur growth. Outgoing Premier Wen Jiabao said on March 5 the nation needs to shift to a more sustainable and efficient economic model.
The index traded at 10.8 times estimated earnings compared with 13 for the Standard & Poor’s 500 Index and 12 for the Stoxx Europe 600 Index, according to data compiled by Bloomberg.
Futures on the S&P 500 gained 0.2 percent today. The U.S. equity benchmark fell 1.4 yesterday as Israel carried out a series of air strikes in the Gaza Strip, killing the leader of Hamas’s militant wing. In the U.S., retail sales fell in October for the first time in four months, influenced by the effects of superstorm Sandy.
Obama is negotiating to reach a deficit-reduction deal with Congress to avert $607 billion in automatic tax increases and spending cuts, or the so-called fiscal cliff.
Companies that do business in the U.S. dropped, with Li & Fung sliding 3.1 percent to HK$12.66. Yue Yuen Industrial Holdings Ltd., a shoemaker that gets 29 percent of its revenue in the U.S., declined 2.7 percent to HK$26.60.
Tencent fell 7 percent to HK$249.20 after third-quarter net income climbed to 3.22 billion yuan ($517 million), missing the 3.33 billion yuan average estimate of eight analysts compiled by Bloomberg.
Of the 51 companies on the Hang Seng Composite Index that have reported quarterly earnings since Oct. 1 and for which estimates are available, 57 percent missed expectations, according to data compiled by Bloomberg.
Esprit surged 22 percent to HK$12.96, the highest close since May 15. Former chairman Michael Ying doubled his stake, fueling speculation that he will help turn around the apparel maker struggling with a sales slump.
The HSI Volatility Index added 4.3 percent to 17.10, indicating traders expect a 4.9 percent swing in the equity benchmark in the next 30 days. Futures on the Hang Seng Index fell 1.2 percent to 21,168.