March 19 (Bloomberg) -- Hong Kong stocks dropped, with the city’s benchmark index erasing gains through the last two hours of trading after reports that Cyprus may not approve a plan to tax bank deposits to fund a bailout.
The Hang Seng Index fell 0.2 percent to 22,041.86 at the 4 p.m. close, erasing an increase of as much as 0.6 percent. The gauge, which is down 2.7 percent this year, is the worst performing developed-market benchmark gauge, according to data compiled by Bloomberg. Industrial & Commercial Bank of China Ltd., the world’s biggest lender by market value, slipped 1.3 percent. China Resources Power Holdings Co. surged 8.1 percent to extend gains after the operator of coal-fired power plants yesterday beat earnings expectations.
Cyprus’s parliament will not approve the nation’s proposed bailout, Reuters reported, citing a government spokesman. Fitch Ratings placed ratings for Cypriot lenders on negative watch.
“Investors are fearing the unknown,” said Andrew Sullivan, director of sale trading at Kim Eng Securities Hong Kong Ltd., a brokerage unit of Malayan Banking Bhd. “People don’t really know what the impact of the Cypriot situation will be. It’s a small country with little economic clout but that doesn’t mean it couldn’t upset the apple cart as Europe remains fragile.”
The Hang Seng Index fell by the most in six weeks yesterday, closing at its lowest since Dec. 4, as more than $500 billion was wiped from global equities on concern that Cyprus’s actions would reignite Europe’s debt crisis.
Trading volumes on the Hang Seng Index were 7.3 percent below the 30-day average. Shares on the measure traded at 10.7 times estimated earnings, compared with 14 for the Standard & Poor’s 500 Index and 12.8 for the Stoxx Europe 600 Index, according to data compiled by Bloomberg.
The Hang Seng China Enterprises Index slipped 0.5 percent to 10,740.05. The measure declined 12 percent from a Feb. 1 high through yesterday, entering a so-called correction, on concern China will introduce more property curbs after home prices posted the broadest advance since December 2011.
“We may see a continued correction in Hong Kong,” said Linus Yip, a Hong Kong-based strategist at First Shanghai Securities Ltd. “Chinese growth isn’t as good as the market expectation.”
Chinese Premier Li Keqiang pledged over the weekend to open the economy to more market forces and strip power from the government to achieve 7.5 percent annual growth through 2020. Gross domestic product last year expanded 7.8 percent, the least in 13 years. Economists expect the economy to grow 8.1 percent this year, according to the median of 46 analyst estimates compiled by Bloomberg.
China’s lenders dropped. ICBC, as China’s largest bank by market value in known, fell 1.3 percent to HK$5.20. China Construction Bank Corp. lost 1.3 percent to HK$6.05.
Belle International Holdings Ltd., the biggest retailer of women’s shoes in China, declined 2.8 percent to HK$13.04. Same-store sales in the second quarter may drop, Spencer Leung, analyst at UBS AG in Hong Kong wrote in a note yesterday. Brokerage maintains sell rating.
China Resources Power Holdings Co. jumped 8.1 percent to HK$22.65, posting its biggest two-day advance since November 2011. The company reported yesterday a 68 percent increase in full-year net income to HK$7.48 billion ($964 million). That compares with the HK$6.8 billion average estimate by 14 analysts surveyed by Bloomberg.
Utilities advanced on optimism other electricity suppliers will also surpass analyst estimates, Shi Yan, an analyst at UOB-Kay Hian Holdings Ltd. in Shanghai, said by phone.
Huaneng Power International Inc., which is due to report full-year results after the close today, climbed 5.3 percent to HK$8.09. The company may report net income of 6 billion yuan ($965 million), compared with 1.2 billion yuan the previous year, according to the average estimate of 15 analysts surveyed by Bloomberg. Datang International Power Generation Co. rose 4.6 percent to HK$3.65.
Hang Seng Index futures lost 0.4 percent to 21,961. The HSI Volatility Index fell 5.7 percent to 16.98, indicating traders expect a swing of 4.9 percent for the equity benchmark in the next 30 days.
To contact the editor responsible for this story: Nick Gentle at email@example.com