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Hong Kong Stocks Fall From 19-Month High; Shenzhen Surges

Jan. 23 (Bloomberg) -- Hong Kong stocks fell, with the city’s benchmark index retreating from a 19-month high, after a technical indicator showed shares may have risen too far, too fast. Shenzhen Investment Ltd. capped its biggest gain since 2008 on plans to buy land in the city.

Shenzhen Investment jumped 16 percent as it pursues a 4.15 billion yuan ($667 million) land purchase. Guangzhou Automobile Group Co. fell 4.6 percent after being cut to sell at UOB Kay Hian Ltd. China Merchants Holdings International Co. dropped 4.2 percent after surging 8.8 percent yesterday. GCL-Poly Energy Holdings Ltd. paced gains among solar stocks on a report China may soon issue entry rules for the industry.

The Hang Seng Index lost 0.1 percent to close at 23,635.10, with about three shares falling for every two that gained on the 50-member gauge. The measure yesterday closed at its highest since May 2011. The Hang Seng China Enterprises Index of mainland companies dropped 0.3 percent to 12,166.70.

“The market actually has been consolidating after a very good run,” said Grace Tam, Hong Kong-based strategist at JPMorgan Asset Management Ltd., which oversees about $1.3 trillion. “With Chinese economic data improving, I believe analysts will start upgrading earnings and that could be a very good catalyst for Hong Kong and China stocks.”

The benchmark Hang Seng Index has gained 4.3 percent this month amid optimism China’s economic slowdown has bottomed. The measure traded at 11.5 times estimated earnings yesterday, compared with 13.5 for the Standard & Poor’s 500 Index and 12.1 for the Stoxx Europe 600 Index, according to data compiled by Bloomberg.

China Manufacturing

HSBC Holdings Plc and Markit Economics tomorrow are due to release a preliminary index measuring Chinese manufacturing activity in January. The gauge may rise to 51.8 from 51.5, according to the median estimate of analysts in a Bloomberg survey. Readings above 50 indicate expansion.

The Hang Seng’s 14-day relative strength index was above the 70 threshold that signals to some investors an asset may have risen too far, too fast. The RSI for China Merchants Holdings jumped to 79 yesterday, when the shares surged 8.8 percent on a report Shenzhen may review land-use policies for a site the company jointly owns. The stock dropped 4.2 percent to HK$27.20 today.

Land Buy

Shenzhen Investment soared 16 percent to HK$3.91. The company backed by its namesake city will buy land there from shareholder Shum Yip Group Ltd. for 4.15 billion yuan ($667 million) in stock, as it plans mixed-use projects. The stock headed for the biggest gain since September 2008.

Guangzhou Automobile Group Co. fell 4.6 percent to HK$6.66 after Ken Lee, an analyst at UOB Kay Hian, recommended investors sell the shares.

GCL-Poly Energy advanced 5.2 percent to HK$2.22, pacing gains among solar companies after Securities News reported China may soon issue entry rules for the industry. China Singyes Solar Technologies Holdings Ltd. added 1.6 percent to HK$9.03.

Futures on the S&P 500 slid 0.2 percent today. The gauge gained 0.4 percent yesterday after better-than-forecast earnings from companies including Travelers Cos. and Freeport-McMoRan Copper & Gold Inc.

The Hang Seng Volatility Index fell 2.2 percent to 13.17, indicating options traders expect a swing of 3.8 percent in the next 30 days. Futures on the Hang Seng Index slid 0.2 percent to 23,629.

To contact the reporter on this story: Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net

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

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