Hong Kong stocks declined, led by mainland railway companies amid concern that reforms may make their markets more contestable. Every industry on the Hang Seng Composite Index, the city’s broadest measure, retreated.
China Railway Railway Construction Corp., one of the country’s two biggest train-line builders, plunged 6.5 percent. China Life Insurance Co., the nation’s No. 1 seller of personal protection policies, slid 3.2 percent after clarifying comments made by its chairman in relation to earnings. Exchange-traded funds linked to Chinese domestic equities tumbled as mainland shares retreated.
The Hang Seng Index slid 0.9 percent to 22,890.60 at the 4 p.m. close in Hong Kong, having earlier gained as much as 0.7 percent. About seven stocks fell for each that rose on the gauge, which retreated 3.9 percent since Jan. 31 amid concerns about whether the pace of Chinese growth will support earnings. Volume was 11 percent less than the 30-day average.
“For the market rally to continue, it’s not just about cheap valuations or accommodative policies, we actually need to see underlying performance from corporates to support the rally,” said Tai Hui, Hong Kong-based chief market strategist for Asia at JPMorgan Asset Management, which has about $2.1 trillion under management. He spoke in a Bloomberg TV interview in Hong Kong. The rally “isn’t busted. It needs a bit more fundamental support, especially from an earnings perspective.”
The Hang Seng China Enterprises Index, which tracks stocks of Hong Kong-listed mainland Chinese companies, declined 1.3 percent to 11,292.14. The ChinaAMC CSI 300 Index ETF, which follows shares in Shenzhen and Shanghai, dropped 2 percent, while the CSOP FTSE China A50 ETF fell 1.9 percent.
The Shanghai Composite Index of so-called A shares slid 1 percent, capping its longest losing streak since November. The CSI 300 Index, a measure of shares in the mainland’s two biggest markets, retreated 1.4 percent.
Hang Seng Index futures lost 1.2 percent to 22,792. The HSI Volatility Index gained 2.6 percent to 15.06, indicating traders expect a swing of 4.3 percent for the equity benchmark in the next 30 days.
Hong Kong is the second-worst performing among 24 developed equity markets tracked by Bloomberg this year, ahead of only Italy, according to data compiled by Bloomberg. The Hang Seng gained 1.9 percent this year through yesterday compared with a 5.6 percent advance on the regional benchmark MSCI Asia Pacific Index.
A gauge of industrial-goods makers had the biggest decline among the 11 industries on the Hang Seng Composite Index, followed by a measure of materials producers.
Asian stocks rose this year as economic data from the U.S. added to signs the global economy is recovering, while Japan’s economy returned to growth and speculation grew its central bank will step up efforts to stimulate the expansion.
China Railway Construction dropped 6.5 percent to HK$7.73. China Railway Group Ltd., the nation’s largest construction firm by assets, slid 5.1 percent to HK$4.08. Reforms announced March 10 are market-oriented and pro-competition, SinoPac Securities analyst Vivian Liu says in phone interview. Railway companies that had enjoyed a degree of government support may be affect, she said.
China Life Insurance Co. slid 3.2 percent to HK$22.55 as the shares of the nation’s biggest insurer resumed trading after being suspended amid comments by its chairman on this year’s earnings.