Hong Kong stocks fell before the outcome of the Federal Reserve policy meeting today, with developers sliding. China Mengniu Dairy Co. soared after bidding for a local baby-food maker.
China Resources Land Ltd. lost 3.3 percent to lead property companies lower after the China Securities Journal reported the government may soon expand property tax trials to more cities. China Mengniu, the country’s largest dairy, surged 6.9 percent after announcing a HK$12.5 billion ($1.6 billion) offer for Yashili International Holdings Ltd. amid rising demand for infant formula.
The Hang Seng Index slid 1.1 percent to 20,986.89 at the close in Hong Kong. Just six stocks on the 50-member gauge rose, with volume 8.7 percent above the 30-day average. The Hang Seng China Enterprises Index dropped 1.5 percent to 9,584.54, the lowest since Sept. 13. Fed Chairman Ben. S. Bernanke will speak today after the Federal Open Market Committee releases a statement and economic forecasts.
“Whatever he’s going to say is going to be bad for risk assets,” Hao Hong, the chief China strategist at Bank of Communications Co., said in a Bloomberg TV interview in Hong Kong. “If you have cash it’s a little bit hasty to put it into the Chinese stock market. We’re going to continue to see a slowdown in economic growth in the second half of the year.”
The Hang Seng China Enterprises Index, also known as the H-Share index, has fallen more than 20 percent from its Feb. 1 high, meeting some investors’ definition of a bear market. The measure is trading at 7.06 times estimated earnings, 26 percent below its three-year average. That compares with 15 times projected profit for the Standard & Poor’s 500 Index, according to Bloomberg data.
The benchmark Hang Seng index dropped 7.4 percent this year, making Hong Kong the worst performer among developed equity markets, according to data compiled by Bloomberg.
China Resources Land slid 3.3 percent to HK$20.75, while China Overseas Land & Investment Ltd. lost 1.9 percent to HK$20.40. The Hang Seng Property Index declined 1.5 percent, the largest fall among the gauge’s industry groups.
Beijing, Shenzhen, Nanjing, Hangzhou and Qingdao have drafted pilot plans to introduce a property tax in an effort to curb rising prices, the China Securities Journal reported, citing unidentified people. The trials are already in place in Shanghai and Chongqing. Mainland home prices climbed from a year earlier in 69 of the 70 cities tracked by the government, the National Bureau of Statistics said yesterday.
China interest-rate traders are the most pessimistic on economic growth in 21 months, with Fitch Ratings Ltd. saying policy makers are focused on fixing the nation’s banks to avert a potential crisis. The one-month Shanghai interbank offered rate, or Shibor, rose to 7.6 percent today, its fourth day above 7 percent. The bid-to-cover ratio at an auction of 10-year sovereign bonds today was 1.43 times, the lowest since August 2012.
“The market is concerned about the increase in the Shibor interbank rate,” said William Fong, investment director of Asian equities at Baring Asset Management in Hong Kong. “Sooner or later the government will need to address the situation.”
Futures on the S&P 500 slid 0.1 percent. The gauge climbed 0.8 percent yesterday to its highest level this month as investors awaited the outcome of the Fed meeting today. About $2 trillion has been erased from global markets since Bernanke said on May 22 that the central bank could begin winding back stimulus if the U.S. job market shows sustainable improvement.
China Mengniu jumped 6.9 percent to HK$28.70 after agreeing to buy 75 percent of Yashili from Chairman Zhang Lidian’s family and Carlyle Group. It will also offer to buy the rest of the baby-food maker for HK$3.50 a share in cash, 5.1 percent higher than Yashili’s June 13 closing price.
Chow Tai Fook Jewellery Group Ltd. rose 2.3 percent to HK$8.86. The world’s largest listed jewelry chain said it expects double-digit sales growth on signs of improving demand.