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Hong Kong Stocks Fall, Caps Monthly Drop; Utilities Slide

May 31 (Bloomberg) -- Hong Kong stocks fell, with the benchmark index capping a monthly drop, as utilities extended declines. Foxconn International Holdings Ltd. jumped on a rating upgrade from Morgan Stanley.

Power Assets Holdings Ltd. took its three-day fall to 8.6 percent as higher bond yields reduced the appeal of dividends. Foxconn jumped 18 percent after Morgan Stanley recommended the phonemaker’s shares. Li Ning Co., a sportswear company named after its Olympic gymnast founder, surged 16 percent after Radio Television Hong Kong reported the company sees its inventory-to-sales ratio returning to normal in the second half. Shares removed from the MSCI China Index slumped. The changes took effect today after the close.

The Hang Seng Index lost 0.4 percent to 22,392.16 at the close, falling 1.5 percent drop for the month. The gauge fell a third straight week, its longest such streak since August 2012. Five stocks slid for every two that rose on the 50-member gauge today, with volume 55 percent higher than its 30-day average. The Hang Seng China Enterprises Index of mainland companies sank 0.9 percent to 10,599.21 before the release of the nation’s manufacturing report tomorrow.

“You can’t be bullish after the market fell so much but with foreign markets being so resilient you can’t be too bearish,” said Alex Wong, a Hong Kong-based director at Ample Capital Ltd. “Utilities remain weak as people are still selling high-yield stocks.”

The Hang Seng Index fell 1.2 percent this year through yesterday, with Hong Kong the only major developed market to decline, on signs China’s growth is slowing. The gauge is trading at 10.7 times estimated earnings, compared with 15 on the Standard & Poor’s 500 Index and 13.4 on the Stoxx 600, according to data compiled by Bloomberg.

Utilities Drop

Utilities had the biggest drop among the Hang Seng Composite Index’s 11 industry groups. Power Assets fell 3.1 percent to HK$68.35. Datang International Power Generation Co., the second-biggest Chinese electricity producer listed in Hong Kong, retreated 3 percent to HK$3.20.

Futures on the S&P 500 declined 0.6 percent today. The index rose 0.4 percent yesterday as weaker-than-expected data on economic growth and jobless claims fuel speculation the Federal Reserve won’t hurry to rein in stimulus.

Li Ning jumped 16 percent to HK$5.29. The company’s sold-out rate has improved since the fourth quarter, and it is on track with reorganization with no need for large-scale store closures, RTHK reported, citing Chairman Li Ning.

Foxconn jumped 18 percent to HK$4.41, its biggest gain since November, after Morgan Stanley raised its rating on the stock and increased its target price to HK$5.5 from HK$3.1.

Sinopec Companies

Sinopec Shanghai Petrochemical Co., a refiner, gained 8 percent to HK$2.85, while Sinopec Yizheng Chemical Fibre Co., a maker of polyester products, jumped 19 percent to HK$2.11. The companies said parent China Petroleum & Chemical Corp., the nation’s largest refiner, plans to reform their A-shares. Mainland-listed stocks of the companies were suspended from trading today.

Companies deleted from MSCI China index fell. Angang Steel Co., which dropped 26 percent this year, fell 4.7 percent to HK$4.22. China Foods Ltd. slumped 2.7 percent to HK$3.90. China Shipping Development Co., the crude and dry-bulk carrier of the nation’s second-largest shipping company, fell 4.4 percent to HK$3.30. Dongfang Electric Corp. retreated 5.1 percent to HK$12.04.

Futures on the Hang Seng Index slipped 0.1 percent to 22,176. The HSI Volatility Index dropped 2.3 percent to 16.59 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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