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Hong Kong Stocks Fall for Second Day as Developers Slide

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Jan. 16 (Bloomberg) -- Hong Kong stocks fell, with the benchmark index headed for a two-day decline, as developers dropped after the city’s chief executive said the government may curb overseas real estate demand and Premier Wen Jiabao said China should establish a property tax.

Hang Lung Properties Ltd., a developer that gets about 55 percent of its revenue in Hong Kong, fell 1.6 percent. China Overseas Land & Investment Ltd., a state-controlled mainland developer, sank 1.2 percent. Industrial & Commercial Bank of China Ltd. sank 1 percent, leading a decline by lenders. Golden Wheel Tiandi Holdings Co. jumped 19 percent on its debut.

The Hang Seng Index lost 0.2 percent to 23,333.77 at the midday break in Hong Kong. The Hang Seng China Enterprises Index of mainland companies dropped 0.9 percent to 11,903.4 as a report showed China’s foreign direct investment declined for the first full year since 2009 as manufacturers relocated in search of cheaper labor.

“Hong Kong property prices are pushing into bubble territory which can cause trouble later down the track,” said Nader Naeimi, Sydney-based head of dynamic asset allocation at AMP Capital Investors Ltd., which manages about $126 billion. “The Chinese are getting very sensitive to big rises in property prices because it’s not a healthy development. The property curbs will be an ongoing development we’ll see this year.”

Futures on the Standard & Poor’s 500 Index were little changed today. The gauge yesterday added 0.1 percent as a rally in retail and transportation companies overshadowed concern about discussions on raising the U.S. government’s debt ceiling.

Share Valuations

Hong Kong’s benchmark index surged 23 percent last year as China’s economy showed signs of improvement and as central banks around the globe added stimulus. Shares on the measure traded at 11.3 times estimated earnings yesterday, compared with 13.3 for the S&P 500 and 12 for the Stoxx Europe 600 Index, according to data compiled by Bloomberg.

Hong Kong will have to damp external demand for housing if natives’ needs aren’t met, city Chief Executive Leung Chun-ying told the Legislative Council in his first policy address today.

China President Hu Jintao expressed support for Leung’s measures to curb rising housing prices, the Ming Pao Daily reported earlier, citing unidentified people with knowledge of a meeting between the two officials.

Also in China, Premier Wen said the country should “gradually” establish a property taxation system that covers trading and ownership, according to a statement published on the central government’s website.

To contact the reporter on this story: Anna Kitanaka in Tokyo at akitanaka@bloomberg.net

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

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