Hong Kong stocks retreated from a 19-month high as exporters fell after Federal Reserve policy makers said they may end their $85 billion monthly bond-purchase program this year. Retailers of luxury goods gained as a report showed sales rebounded in the city.
Techtronic Industries Co., a maker of power tools that counts North America as its biggest market, slid 1.9 percent. Financial companies fell the most on the index, led by HSBC Holdings Plc, Europe’s largest bank, which slid 1.6 percent. Emperor Watch & Jewellery Ltd. surged 4.9 percent, leading gains among sellers of luxury goods.
The Hang Seng Index fell 0.3 percent to 23,331.09 at the close in Hong Kong, its biggest drop in two weeks, after closing yesterday at a 19-month high. It had a weekly gain of 2.9 percent. The Hang Seng China Enterprises Index of mainland companies listed in the city slid 0.4 percent to 11,937.45.
“Hong Kong stocks rose by almost 800 points in the last two sessions,” said Peter Lai, director of sales at DBS Vickers Hong Kong Ltd., noting that much of the decline was profit-taking. As to the end of the U.S. bond-buying program, he said, “Psychologically, for the short term there may be some impact from it.”
The Hang Seng Index rose 23 percent last year. The gauge advanced 12 percent from the end of September through yesterday as signs of accelerating growth in China lured funds made available by global central-bank easing. The Hong Kong Monetary Authority has injected HK$107.19 billion ($13.8 billion) into the financial system to maintain the local currency’s peg to the U.S. dollar since Oct. 21, the first time it had to do so since 2009.
Standard & Poor’s 500 Index futures gained 0.1 percent today after the gauge fell 0.2 percent yesterday. Four years after cutting the main interest rate to near zero, U.S. policy makers have been expanding their third round of so-called quantitative easing to boost economic growth and cut the jobless rate, now at 7.7 percent.
Minutes, released yesterday in Washington, show a divide among Federal Open Market Committee participants on how long bond purchases should last. Participants who provided estimates were “approximately evenly divided” between those who said it would be appropriate to end the purchases around mid-2013 and those who said they should continue beyond that date.
Exporters fell in Hong Kong, with Techtronic falling to HK$14.72. Li & Fung Ltd., a supplier of toys and clothes to Wal-Mart Stores Inc., fell 0.1 percent to HK$14.50. Man Wah Holdings Ltd., a sofa maker that gets about half its sales from the U.S., dropped 2.4 percent to HK$6.40.
“The work that we’ve done shows often what has caused previous recessions was pulling stimulus off too early before growth started to build on itself,” said James Lindsay, Auckland-based equity fund manager at Tyndall Investment Management Ltd., which oversees about $23 billion. “This has been more of a relief rally than anything else. The hard yards are still to come. U.S. economic data remains pretty mixed.”
Banks, brokerages and insurance companies fell the most in Hong Kong, with the Hang Seng Finance index retreating 0.5 percent, after it surged 4 percent to a 19-month high in the past two days of trading. HSBC dropped 1.6 percent to HK$82. China Life Insurance Co., the nation’s largest insurance company fell 0.4 percent to HK$27.00 after jumping the most in a year on Jan. 2. Industrial & Commercial Bank of China Ltd., the world’s No. 1 lender by market value, declined 0.3 percent to HK$5.79.
The Hang Seng Index traded at 11.3 times estimated earnings on average yesterday, compared with 13.1 times for the Standard & Poor’s 500 Index and 11.9 times for the Stoxx Europe 600 Index, according to data compiled by Bloomberg.
Luxury goods retailers and makers gained after sales of items including jewelry and watches jumped 13.7 percent in November from a year earlier after a 2.9 percent decline in October, Hong Kong’s government said in a statement on its website yesterday. The role of mainland Chinese tourists in driving the city’s retail sales makes the figures one gauge of sentiment in the world’s second-biggest economy.
Emperor Watch & Jewellery gained 4.9 percent to HK$1.08. Hengdeli Holdings Ltd., the Chinese partner of Swatch Group AG, rose 1.7 percent to HK$3.01. Sa Sa International Holdings Ltd., Hong Kong’s biggest cosmetics retail chain, increased 1.4 percent to HK$6.61.
Gome Electrical Appliances Holding Ltd., a household appliance retailer, rose 6.6 percent to HK$1.13, its highest level since June 21.
Futures on the Hang Seng Index fell 0.7 percent to 20,290. The HSI Volatility Index fell 3.8 percent to 14.87, its lowest level in a month, indicating traders expect a swing of 4.3 percent for the equity benchmark in the next 30 days.