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Hong Kong Stocks Fall as Property Developers Lead Decline

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Dec. 18 (Bloomberg) -- Hong Kong stocks fell a second day as developers sank on speculation China may tighten property curbs. AIA Group Ltd. dropped after American International Group Inc. announced the sale of its stake in the insurer.

Shimao Property Holdings Ltd., a developer that gets all its revenue from China, fell 3.4 percent after a report showed a jump in home prices, fueling concern the government will rein in prices. AIA, the third-largest Asia-based insurer, fell 3.3 percent. China Oilfield Services Ltd., a drilling provider, dropped 1.3 percent after the stock’s rating was cut at Credit Suisse AG on tax concerns. China Railway Construction Corp. rose 2.9 percent after Barclays Plc named it a top pick.

The Hang Seng Index fell 0.1 percent to 22,494.73 at the close after rising as much as 0.3 percent. Five shares dropped for every four that gained on the 50-company measure, with volume more than double the 30-day average, according to data compiled by Bloomberg. The Hang Seng China Enterprises Index of mainland companies increased 0.1 percent to 11,301.72. Losses were limited on optimism U.S. President Barack Obama would reach a budget compromise.

“The market is expecting the U.S. budget cliff will be solved eventually,” said Linus Yip, chief strategist at First Shanghai Securities in Hong Kong. “But there will still be noises before final results come out. The overall market will be stable but there will be some switching activities” from property shares which had a good run recently.

Most stocks traded in the mainland fell, led by property companies. Foreign direct investment in China fell the 12th time in 13 months, suggesting the nation’s rebound in growth has yet to attract a fresh influx of capital spending from abroad. China’s Shanghai Composite Index advanced 0.1, with about five stocks declining for every three that gained.

Annual Gain

Hong Kong’s benchmark index advanced 22 percent this year through yesterday, erasing last year’s 20 percent drop. Shares rose as central banks added stimulus and China and the U.S. showed signs of economic recovery. Shares on the measure traded at 11.8 times average estimated earnings yesterday, compared with 13.8 for the Standard & Poor’s 500 Index and 12.7 for the Stoxx Europe 600 Index, according to data compiled by Bloomberg.

S&P 500 futures advanced 0.3 percent. The gauge surged 1.2 percent yesterday. Obama offered a budget compromise that would increase tax rates for households earning more than $400,000 a year, a concession from his earlier bid to raise taxes on those earning more than $250,000, said a person familiar with the talks.

Budget Offer

In exchange, Obama asked for authority to increase the U.S. debt limit for two years without congressional approval. The president is negotiating with Republican lawmakers to avert the so-called fiscal cliff, more than $600 billion in tax increases and spending cuts set to start in January.

AIA sank 3.3 percent to HK$30.60 and was the most actively traded stock by value on the Hang Seng Index. AIG, the insurer that repaid a U.S. bailout, sold 1.65 billion AIA shares at HK$30.30 each, AIA said in a statement today.

China Oilfield slid 1.3 percent to HK$15.80. Credit Suisse cut its rating to neutral from outperform, saying dispute with Norwegian tax authorities will be an overhang on the shares in the near term.

A measure of developers had the steepest decline among the Hang Seng Index’s four industry groups. The measure surged 37 percent this year through yesterday, compared with the 22 percent gain by the Hang Seng Index.

Shimao slumped 3.4 percent to HK$14.12. China Resources Land Ltd., a state-controlled developer, fell 1.9 percent to HK$19.96. Guangzhou R&F Properties Ltd., a builder in the southern Chinese city, retreated 3.9 percent to HK$12.40.

China Property

China’s new home prices climbed in 53 of 70 cities last month, compared with 35 in October, according to data from the National Bureau of Statistics today. That was the most in 18 months. Among major cities, home prices in Beijing and Guangzhou rose 0.6 percent each, while Shanghai climbed 0.2 percent from October.

Among stocks that rose, China Railway Construction gained 2.9 percent to HK$8.87, while China Mobile Ltd., the world’s biggest phone company by subscribers, advanced 1.1 percent to HK$89.95. Barclays listed the stocks among its top picks for the year ahead.

“There is still rising pressure on home prices, so it’s very difficult for the government to relax the measures,” Ding Shuang, a Hong Kong-based economist with Citigroup Inc., said in a phone interview today. “The government will strengthen the enforcement of the current curbs if not necessarily issue new measures.”

Giordano International Ltd. rose 3 percent to HK$7.47. Investors are probably shifting to the stock from other Chinese clothiers because it has the best management in the sector amid a tough retail environment, Ray Kwok, an analyst at Cimb Securities HK Ltd., said in a phone interview.

Citic Resources Climbs

Citic Resources Holdings Ltd., a Chinese oil and coal producer, gained 4.3 percent to HK$1.21. The stock rose after parent Citic Group Corp. bought 30.9 million shares in the unit at an average price of HK$1.239 each, according to a filing with the Hong Kong bourse.

Futures on the Hang Seng Index gained 0.1 percent to 22,506. The HSI Volatility Index rose 0.2 percent to 15.68, indicating traders expect a swing of 4.5 percent for the equity benchmark in the next 30 days.

To contact the reporter on this story: Kana Nishizawa in Hong Kong at knishizawa5@bloomberg.net

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

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