Hong Kong stocks fell, with the benchmark index capping its lowest close in more than a month, as the city’s developers and utilities retreated amid concern the Federal Reserve will reduce its bond buying.
Sun Hung Kai Properties Ltd., Hong Kong’s biggest builder, dropped 2.5 percent, widening yesterday’s slide on concern rising interest rates will hurt the property market. CLP Holdings Ltd., the city’s largest electricity producer, retreated 3.3 percent as higher Treasury yields eroded the appeal of dividends. Langham Hospitality Investments Ltd. slumped 9.2 percent in the hotel operator’s trading debut.
The benchmark Hang Seng Index slid 0.3 percent to 22,484.31, its lowest close since April 25. About two stocks fell for each that gained, with trading volume 8.7 percent more than its 30-day intraday average. The Hang Seng China Enterprises Index of mainland companies slid 0.6 percent to 10,689.99.
“There’s concern about when the Federal Reserve will stop quantitative easing, and there are downside risks for China’s economy,” said Ben Kwong, chief operating officer at brokerage KGI Asia Ltd. in Hong Kong. “I don’t think there’s fresh incentive for the Hong Kong market to move up, but the downside is relatively small.”
The Hang Seng Index fell 0.8 percent this year, the only major developed market to decline, amid a slowdown in China’s growth. 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 0.2 percent today. The U.S. equity index dropped 0.7 percent in New York yesterday amid concern the Fed will start to taper its debt-buying program as the economy improves.
Sun Hung Kai fell 2.5 percent to HK$103.20. Cheung Kong (Holdings) Ltd., the city’s second-biggest developer by market value, sank 1.4 percent to HK$110. Interest rates are expected to rise in Asia as savings drop and the Fed reins in quantitative easing, Morgan Stanley said in a note yesterday.
The yield on U.S. benchmark 10-year debt extended gains today after surging yesterday to a 13-month high. Hong Kong’s interest rates follow the U.S as the city’s currency is pegged to the greenback.
Rising yields also weighed on utility shares, which fell the most among the Hang Seng Composite Index’s 11 industry groups. CLP fell 3.3 percent to HK$66.95. Power Assets Holdings Ltd. retreated 3.7 percent to HK$70.50.
“People are worried the interest rates may rise,” said Kenny Tang, general manager of AMTD Financial Planning Ltd. in Hong Kong. “That undermines the attractiveness of utility stocks because last year, the market thought their dividend yields were attractive compared to low interest rates.”
Investors should book gains from utility stocks as debt yields start to rise, CLSA Asia-Pacific Markets Ltd. analysts led by Rajesh Panjwani wrote in a note dated yesterday.
Langham Hospitality fell 9.2 percent to HK$4.54, below the lower end of the initial public offering target-price range of HK$4.65 to HK$5.36 per share. The hotelier raised HK$4.08 billion going public.
Prince Frog Tumbles
Prince Frog International Holdings Ltd., a maker of diapers and children’s shampoos whose shares have more than doubled since July, tumbled 9.1 percent to HK$5.50. The share price may consolidate as investors take profit in the absence of catalysts before earnings are announced in August, CCB International Holding Ltd. said.
Among stocks that rose, Fosun International Ltd., a Shanghai-based investment arm the closely held Chinese industrial group, jumped 10 percent to HK$6.88. The company said it is forming a logistics venture with investors including Alibaba Group Holding Ltd.
Futures on the Hang Seng Index dropped 0.3 percent to 22,464. The HSI Volatility Index declined 0.7 percent to 16.98, indicating traders expect a swing of 4.9 percent for the equity benchmark in the next 30 days.