Hong Kong Stocks Decline on China Property, Fed Concern

Feb. 21 (Bloomberg) -- Hong Kong stocks dropped, with a gauge of Chinese equities listed in the city erasing this year’s gains, amid calls for property curbs in China and as Federal Reserve minutes showed divisions over stimulus measures.

Guangzhou R&F Properties Co. slipped 1.6 percent, pacing declines among Chinese developers. Li & Fung Ltd., a supplier of toys and clothes to retailers including Wal-Mart Stores Inc., fell 1.5 percent. Belle International Holdings Ltd. tumbled 17 percent after the retailer of women’s shoes said it expects 2012 profit to be at the lower end of analyst estimates.

The Hang Seng Index fell 1.7 percent to 22,906.67 in Hong Kong, the lowest close since Dec. 31. The gauge declined 3.5 percent this month, heading for its first monthly drop since September and making it the third-worst performer among the world’s developed equity markets, according to data compiled by Bloomberg.

“This consolidation is healthy for the market since the market has done quite well,” said Daphne Roth, Singapore-based head of Asia equity research at ABN Amro Private Bank, which oversees about $207 billion. “We’ve become a little bit cautious on the Chinese property market. Property prices have gone up rapidly and that increases the risk of government tightening.”

Trading volumes on the Hang Seng Index were 24 percent above the 30-day average, according to data compiled by Bloomberg. The measure rallied the past five months, the longest such streak since July 2009, after the U.S. Federal Reserve embarked on a third round of quantitative easing in September and on optimism China’s recovery will continue.

Property Curbs

Shares on the benchmark index traded at 11.1 times estimates earnings, compared with 13.7 times for the Standard & Poor’s 500 Index and 12.5 times for the Stoxx Europe 600 Index, according to data compiled by Bloomberg.

The Hang Seng China Enterprises Index of mainland companies dropped 2.2 percent to 11,426.22, erasing this year’s advance. Chinese Premier Wen Jiabao called for local authorities to “decisively” curb real estate speculation and take steps to rein the property market after data showed prices surged the most in two years.

Guangzhou R&F fell 1.6 percent to HK$12.48. Country Garden Holdings Co., the Foshan, China-based real estate company controlled by billionaire Yang Huiyan, slid 3.3 percent to HK$3.76. Soho China Ltd., the biggest developer in Beijing’s central business district, dropped 1.8 percent to HK$6.01.

Futures on the S&P 500 Index lost 0.1 percent today. The equity gauge fell 1.2 percent in New York yesterday, the biggest drop since November, as minutes of the Federal Open Market Committee’s Jan. 29-30 meeting showed policy makers were divided about the strategy behind Chairman Ben S. Bernanke’s program of buying bonds, known as quantitative easing, until there is “substantial” improvement in a U.S. labor market.

Export Shares

Exporters to the U.S. slid. Li & Fung declined 1.5 percent to HK$10.40. Yue Yuen Industrial (Holdings) Ltd., a supplier of shoes to Nike Inc., slipped 1.6 percent to HK$27.15. Techtronic Industries Co., a power-tool maker that gets 72 percent of sales from North America, decreased 2.4 percent to HK$15.54.

Raw-material producers fell after metals and crude futures slid. Jiangxi Copper Co., China’s biggest supplier of the metal, sank 3.2 percent to HK$18.74. Aluminum Corp. of China Ltd. dropped 2.5 percent to HK$3.46. Cnooc Ltd., the nation’s largest offshore oil producer, slipped 1.2 percent to HK$15.54.

Belle International plunged 17 percent to HK$15.28, the biggest decline since May 2007. Full-year 2012 net income will come in at the lower end of analyst estimates, ranging from 4.29 billion yuan ($687 million) to 4.85 billion yuan, the company said yesterday.

MGM China Dividend

Among stocks that advanced, MGM China Holdings Ltd., the casino venture between a daughter of gambling mogul Stanley Ho and MGM Resorts International, gained 2.8 percent to HK$17.38 after saying it will pay a special dividend of HK$1.02 per share.

The HSI Volatility Index jumped 10 percent to 15.58, the biggest advance since July 23 and indicating traders expect a swing of about 4.5 percent during the next 30 days. Futures on the Hang Seng Index expiring this month fell 1.6 percent to 22,858.

To contact the reporter on this story: Jonathan Burgos in Singapore at jburgos4@bloomberg.net

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