Hong Kong stocks fell, with the city’s benchmark index dropping to a one-month low, led by developers amid concern the Federal Reserve will trim its debt purchases in the months ahead, pushing interest rates higher.
Wharf Holdings Ltd. sank 5.7 percent, leading Hong Kong developers lower. Zoomlion Heavy Industry Science and Technology Co., China’s second-largest construction equipment maker, fell 5.4 percent as it resume trading after denying allegations of falsified sales. Man Wah Holdings Ltd., a sofa maker that gets about 51 percent of sales from the U.S., gained 5.4 percent, after U.S. consumer confidence rose.
The Hang Seng Index fell 1.6 percent to 22,554.93 at the close, the lowest since April 26. Only four stocks advanced on the 50-member gauge, with trading volume 4.2 percent lower than the 30-day average. The Hang Seng China Enterprises Index of mainland companies retreated 1.6 percent to 10,751.29.
“If we see a global tightening or retreat in quantitative easing, money will leave Hong Kong,” said Steven Leung, director of institutional sales at UOB-Kay Hian Holdings Ltd. in Hong Kong. “Interest rates in Hong Kong will follow and that would have a big impact. Finance and property sectors will be very sensitive to interest rates or liquidity flows.”
Under so-called quantitative easing, the Fed buys $85 billion of Treasury and mortgage debt a month to support the economy by putting downward pressure on interest rates. Chairman Ben S. Bernanke said last week the central bank may cut the pace of its purchases if officials see signs of sustained improvement in growth.
The Hang Seng Index is down 0.5 percent this year through today, the worst year-to-date return among major developed markets, amid a lack of policies to reverse a slowdown in China’s economy. The gauge is trading at 10.7 times estimated earnings, below its five-year average of 12.6, according to data compiled by Bloomberg.
Futures on the Standard & Poor’s 500 Index slid 0.4 percent today. The benchmark equity gauge rose 0.6 percent yesterday after data showed U.S. consumer confidence climbed in May to the highest level since 2008, while home prices advanced in the 12 months through March by the most in seven years.
Exporters advanced. Man Wah climbed 5.4 percent to HK$7.97. Yue Yuen Industrial Holdings Ltd., which makes shoes for Nike Inc., gained 1.6 percent to HK$22.40. Techtronic Industries Co., the maker of Ryobi power tools that gets about 73 percent of sales from North America, added 0.7 percent to HK$20.30.
Developers had the biggest decline among the Hang Seng Index’s industry groups. Wharf slumped 5.7 percent to HK$69.90. Sun Hung Kai Properties Ltd., Hong Kong’s biggest builder, retreated 2.5 percent to HK$105.80. Hang Lung Properties Ltd. sank 3.6 percent to HK$28.55.
Hong Kong Mortgages
Bank of China Ltd.’s Hong Kong unit isn’t seeing many new customers for mortgages this year, Chief Executive Officer He Guangbei said yesterday. The city’s mortgage drawdown in April decreased 19 percent from the previous month, the Hong Kong Monetary Authority said on May 27, and mortgage loans approved in April dropped 25 percent from March.
Zoomlion decreased 5.4 percent to HK$7.49. The shares were halted May 27 in Shenzhen and Hong Kong after Sina.com published an article by the Xin Kuai Bao newspaper accusing the company of improperly accounting for sales. The article was “distorted” and “misleading,” Zoomlion said in a Shenzhen stock exchange filing yesterday, adding that KPMG and one other auditor had signed off on its 2012 financial report.
Cosco Pacific Ltd., the container-terminal arm of China’s largest shipping group, dropped 1.4 percent to HK$11.22. Shares jumped 6.6 percent yesterday after Morgan Stanley raised its rating on the shares to overweight from equalweight.
Mainland lenders fell after the International Monetary Fund lowered its estimates for China’s growth, with expansion of 7.75 percent this year and next. Industrial & Commercial Bank of China Ltd., the world’s largest lender, dropped 1.5 percent to HK$5.42. China Construction Bank Corp. lost 1.4 percent to HK$6.32.
Chinese automakers climbed. The nation’s April auto inventory of 1.68 months announced by the China Automobile Dealers Association shows that the balance between demand and supply is healthy, Daiwa Securities Co. analyst Jeff Chung wrote in a report.
BYD Co., the Chinese auto company partially owned by Warren Buffett’s Berkshire Hathaway Inc., gained 4.6 percent to HK$34.95. Great Wall Motor Co., a maker of sport utility vehicles and pickup trucks, increased 3.9 percent to HK$38.55.
Futures on the Hang Seng Index dropped 1.5 percent to 22,527. The HSI Volatility Index jumped 3.5 percent to 17.10, indicating traders expect a swing of 4.9 percent for the equity benchmark in the next 30 days.