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Hong Kong Stocks Fall, Led by China Developers, on Policy

March 4 (Bloomberg) -- Hong Kong stocks fell, with the benchmark index falling the most in more than a week, as Chinese developers sank after the nation tightened mortgage rules to cool the property market.

China Resources Land Ltd., a state-owned developer, declined 8.9 percent, the biggest drop since October 2011. Sands China Ltd., the Asian unit of Sheldon Adelson’s Las Vegas company, slid 1.2 percent after its parent said for the first time that it probably violated the U.S. Foreign Corrupt Practices Act. Jiangxi Copper Co., China’s biggest supplier of the metal, fell 3.5 percent after metal prices slid. Chinese banks dropped after the nation’s services industries expanded at the slowest pace since September.

The Hang Seng Index slid 1.5 percent to 22,537.81 at the close, its biggest drop since Feb. 21. Six stocks declined for each that rose in the 50-member gauge, with trading volume about 25 percent above its 30-day average for the time of day, according to data compiled by Bloomberg. The Hang Seng China Enterprises Index of mainland companies retreated 2.1 percent to 11,104.65 ahead of the start of the National People’s Congress in Beijing tomorrow.

“People are a little bit worried that instead of good policies we might see more of these strict policies from the National People’s Congress,” said Jackson Wong, vice president at Hong Kong-based brokerage Tanrich Securities Co. The property measures “indicate the central government is not hesitant to combat any bubbles. The main concern would be the property tax on sales, which is 20 percent. That’s a big number and would absolutely damage the overall Chinese property market.”

Sales Tax

China called for higher down-payments and interest rates for second-home mortgages in cities with “excessively fast” price gains and ordered stricter enforcement of taxes on sales, according to a statement by the State Council, or cabinet, on March 1. Individuals selling properties should “strictly” pay a 20 percent tax on profits from sales when the original purchase price is available, according to the statement.

A measure of property developers in Hong Kong sank 3.4 percent, its biggest drop since October. China Resources Land tumbled 8.9 percent to HK$20.60, while China Overseas Land & Investment Ltd., the biggest Chinese real-estate company traded in Hong Kong, declined 7.1 percent to HK$21.45. They were the two biggest drops in the Hang Seng Index. Guangzhou R&F Properties Ltd., a builder in the southern Chinese city, tumbled 11 percent to HK$11.58.

Cement makers also fell. Anhui Conch Cement Co., the mainland’s biggest maker of the material, retreated 4.8 percent to HK$27.80, while China National Building Material Co. slid 3.1 percent to HK$11.76.

Services Industry

Hong Kong’s benchmark index last month posted its first monthly decline since August as Chinese and local developers slid on concern the government will introduce more measures to curb property prices. The gauge traded at 11.1 times average estimated earnings on March 1, compared with 13.7 for the Standard & Poor’s 500 Index and 12.4 for the Stoxx Europe 600 Index, according to data compiled by Bloomberg.

A purchasing managers’ index released yesterday showed China’s services industries expanded at the slowest pace in five months. A government manufacturing PMI gauge released last week missed estimates. Chinese legislators begin an annual conference tomorrow, during which the government usually announces economic targets for the year.

Industrial & Commercial Bank of China Ltd., the world’s No. 1 lender by market value, dropped 2.2 percent to HK$5.40 while Agricultural Bank of China Ltd. retreated 2.5 percent to HK$3.87.

Sands China dropped 1.2 percent to HK$36.35. Its parent Las Vegas Sands Corp. said in its annual report there were likely violations of the books and records and internal controls provisions of the FCPA, citing an internal investigation by the audit committee.

Metal Prices

Jiangxi Copper retreated 3.5 percent to HK$17.48, and United Co. Rusal, the largest aluminum producer, sank 3.4 percent to HK$4.22 after stating plans to cut output. The London Metal Exchange Index of prices for six industrial metals including copper and aluminum fell 1.4 percent on March 1.

Futures on the S&P 500 slipped 0.5 percent. The gauge gained 0.2 percent on March 1, erasing earlier losses, as better-than-estimated data on consumer confidence and manufacturing offset concerns about federal spending cuts.

Hang Seng Index futures fell 1.7 percent to 22,468. The HSI Volatility Index jumped 12 percent to 16.87, indicating traders expect a swing of 4.8 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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