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Hang Seng Index Declines as Tencent Slump Chinese Data

March 21 (Bloomberg) -- Hong Kong’s benchmark Hang Seng Index fell, dragged down as slumps by Tencent Holdings Ltd. and China Resources Enterprise Ltd. overshadowed a report China’s manufacturing is expanding at a faster pace.

Tencent, China’s biggest Internet company, sank 4 percent after analysts from Morgan Stanley to Goldman Sachs Group Inc. cut their price targets. China Resources Enterprise, the government-backed partner of SABMiller Plc, dropped 5.3 percent after its brewery business reported slower earnings growth. Chow Tai Fook Jewellery Group Ltd., the world’s biggest jeweler by market value, added 1.9 percent after Barclays Plc said sales will improve.

The Hang Seng Index slipped 0.1 percent to 22,225.88 at the close, erasing an advance of as much as 0.7 percent. The Hang Seng China Enterprises Index, also known as the H-Share index, dropped 0.3 percent to 10,944.35, after gaining as much as 1.2 percent. The gauges jumped earlier today as a Chinese Purchasing Managers’ Index expanded faster than analyst estimates.

“We’re still in a consolidation phase,” said Jackson Wong, vice president at Hong Kong-based brokerage Tanrich Securities Co. “Investors are probably waiting for the Cyprus situation to be resolved.”

The Hang Seng Index fell 3.5 percent this month as China’s efforts to rein in property prices added to concern that Europe might be unable to contain its debt crisis as Cyprus this week rejected a bailout plan. The H-Share index declined 10 percent from a Feb. 1 high through today, entering a so-called correction, on concern China will introduce more property curbs after home prices posted the broadest advance since December 2011.

Relative Value

Volumes on the benchmark Hang Seng Index were 9.1 percent lower than the 30-day average, according to data compiled by Bloomberg. Shares on the gauge traded at 10.8 times estimated earnings, compared with 14.1 for the Standard & Poor’s 500 Index and 12.8 for the Stoxx Europe 600 Index, according to data compiled by Bloomberg.

The PMI, an indicator of the nation’s manufacturing activity, climbed to 51.7 in March from the 50.4 final reading last month, according to a preliminary survey released by HSBC Holdings Plc and Markit Economics today. That compares with the 50.8 median estimate in a Bloomberg News survey of 11 analysts. A reading above 50 indicates expansion.

Tencent Slumps

Tencent slumped 4 percent to HK$252.40, the lowest since Dec. 31. Morgan Stanley cut its share price forecast by 1.6 percent to HK$315.70, citing lower profit margins and slowing growth in online game sales. Goldman Sachs, JPMorgan Chase & Co., Piper Jaffray Cos., CIMB Group Holdings Ltd., OSK Securities Hong Kong Ltd. and Bocom International Securities Ltd. also lowered their price targets.

China Resources Enterprise dropped 5.3 percent to HK$23.15. Profit at the beer division, which makes China’s best-selling Snow brand with SABMiller, rose 4.8 percent to HK$823 million ($106 million) in 2012, the company said today. The pace of earnings growth in that business slowed from 15 percent a year earlier. Acquisitions helped boost the group’s net income by 31 percent, beating analyst estimates.

Among stocks that gained, Chow Tai Fook added 1.9 percent to HK$10.82. Barclays maintained its overweight rating on the stock, saying same-store sales are improving amid signs discretionary spending in China is strengthening.

Guangzhou R&F Properties Co., a developer in the southern Chinese city, jumped 5.1 percent to HK$12.82 after Citic Securities Co. and JPMorgan raised their ratings to overweight from hold.

Hang Seng Index futures fell less than 0.1 percent to 22,248. The HSI Volatility Index slid 2.2 percent to 16.18, indicating traders expect a swing of 4.6 percent for the equity benchmark in the next 30 days.

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

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