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Hong Kong Stocks Fall as Developers Drop, Airlines Rise

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April 8 (Bloomberg) -- Most Hong Kong stocks fell as the city’s developers slid after Centaline Property Agency said home transaction volume and prices declined. Hong Kong-listed airlines and railway shares rebounded after plunging last week amid an outbreak of a new strain of bird flu in China.

Henderson Land Development Co., controlled by billionaire Lee Shau-kee, retreated 1 percent. Man Wah Holdings Ltd., a sofa maker that gets half of its sales from the U.S., fell 1.3 percent after the nation’s payrolls rose less than forecast. Cathay Pacific Airways Ltd., Asia’s largest international carrier, climbed 4.1 percent after slumping to a seven-month low last week.

About nine stocks slid for every eight that rose on the Hang Seng Composite Index, the city’s broadest equity measure. The Hang Seng Index slipped less than 0.1 percent to 21,718.05 at the close, with volume 23 percent below the 30-day intraday average. The measure last week slumped to its lowest level since November on concern an outbreak of bird flu in China may spread.

“There’s going to be near-term pressure no matter how you cut it,” said Marco Li, Hong Kong-based portfolio manager at Manulife Asset Management, which oversees $238 billion globally. “You have this overhang now, and until you get clarity, people will see that as a potential risk for further exacerbation.”

Mainland Shares

The Hang Seng China Enterprises Index of mainland companies was little changed after dropping 3.1 percent on April 5. China’s Shanghai Composite Index retreated 0.6 percent as it opened for the first time since April 3.

The Hang Seng Index fell 8.8 percent through last week from a high in January as Hong Kong and mainland developers led declines amid government efforts to rein in property prices, and on concern that Europe’s debt crisis isn’t resolved.

The measure traded at 10.4 times average estimated earnings on April 5, compared with 14 for the Standard & Poor’s 500 Index and 12.3 for the Stoxx Europe 600 Index, according to data compiled by Bloomberg.

A measure of developers had the biggest drop among the Hang Seng Index’s four industry groups. Henderson Land fell 1 percent to HK$52.50, while New World Development Co., the Hong Kong builder controlled by billionaire Cheng Yu-tung, dropped 1.3 percent to HK$12.66.

The city’s existing home transaction volume dropped 20 percent to 12 deals last weekend from a week earlier, while secondary private residential property prices fell 0.4 percent in the seven days to March 31, Centaline Property Agency said.

Sars Memories

“It’s tough because in investors’ minds a lot of people can remember Sars in 2003,” said Li. “There’s a bit of fear from what potentially can happen, especially in Hong Kong, because they do remember the magnitude of it.”

China tried to ease concerns that a new strain of bird influenza will spark an epidemic as authorities reported three more infections of the deadly H7N9 virus that’s killed six people since March. More than 600 people have been infected with the H5N1 bird flu strain since 2003, and almost 60 percent have died, according to the World Health Organization.

Cathay Pacific rose 4.1 percent to HK$12.78. China Southern Airlines Co., the country’s biggest domestic carrier, increased 3.4 percent to HK$4 and Air China Ltd., the nation’s biggest carrier by market value, jumped 4.5 percent to HK$6.32. The companies tumbled at least 8.5 percent on April 5.

China Railway Group Ltd. and China Railway Construction Corp., the nation’s two biggest train line builders, climbed 2.2 percent and 1.8 percent respectively. The companies both fell 3.7 percent on April 5 amid concern the new flu strain would damp economic growth.

Death Toll

During the 2003 Sars outbreak, the Hang Seng Index hit its lowest level since the Asian financial crisis. The gauge closed at 8,409.01 on April 25, 2003, the lowest since Oct. 8, 1998.

Sars killed 300 people in Hong Kong, prompting governments worldwide to impose travel restrictions on the city as mainland authorities sought initially to cover up the disease’s spread. Hong Kong’s gross domestic product contracted 2.4 percent during the quarter, the most until the depths of the global financial crisis in 2009.

The Centaline Property Centa-City Monthly Index of home prices fell to a record low of 31.37 in April 2003, prompting a raft of support measures from the city’s government. The Centaline gauge was at 116.48 at the end of January.

Among other shares that gained, Belle International Holdings Ltd., the mainland’s largest footwear retailer, climbed 4.3 percent to HK$12.62 after being picked as a preferred stock by Barclays.

Exporters Slump

Futures on the S&P 500 climbed 0.2 percent today. The gauge dropped 0.4 percent April 5 after data showed the U.S. economy added less than half the number of jobs economists forecast in March.

Man Wah slid 1.3 percent to HK$6.90, while Techtronic Industries Co., a power-tool maker that counts North America as its biggest market, declined 1.6 percent to HK$17.76.

Prada SpA, an Italian maker of luxury handbags, slid 4 percent to HK$74 after Barclays cut its rating on the stock to equal-weight from overweight saying the shares are fairly valued. Further margin growth will be limited by moderate same-store sales growth and a high base, Barclays analysts led by Candy Huang wrote in a report.

Hang Seng Index futures fell 0.1 percent to 21,640. The HSI Volatility Index dropped 0.4 percent to 16.90, 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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