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Hong Kong Stocks Decline After China Services PMI Drops

Hong Kong stocks fell, with the benchmark equity index heading for a second day of declines, after the city’s home sales plunged and an official report showed China’s services industry expanded at a slower pace.

Industrial & Commercial Bank of China Ltd., the world’s largest lender, slipped 4 percent. Sun Hung Kai Properties Ltd., Hong Kong’s biggest developer, decreased 2.3 percent. Luk Fook Holdings International Ltd., a jewelry retailer, dropped 2.9 percent after the city’s retail sales missed estimates in May. Shares extended declines after Portuguese bond yields climbed above 8 percent for the first time since November after two ministers quit the government.

The Hang Seng Index sank 2.5 percent to 20,147.31 at the close in Hong Kong, with all but three stocks falling. Volume on the gauge was 10 percent higher than the 30-day average. The Hang Seng China Enterprises Index, which capped its worst first half since 2008 last month, slid 3.3 percent to 8,900.25.

“Market sentiment remains weak amid concern about slowing growth in China and tapering of Federal Reserve policy,” said Ng Soo Nam, Singapore-based chief investment officer at Nikko Asset Management Asia Ltd., whose Japan-based parent oversees about $165 billion. “Chinese equities are extremely cheap.”

The Hang Seng Index posted its biggest monthly decline in a year last month, declining 7.1 percent as China’s money-market rates surged to record and after Fed Chairman Ben S. Bernanke said policy makers may start dialing down stimulus if the U.S. economy shows sustained improvement.

Relative Value

Shares on the benchmark gauge traded at 9.58 times estimated earnings, compared with multiples of 14.6 for the Standard & Poor’s 500 Index and 12.7 for the Stoxx Europe 600 Index, according to data compiled by Bloomberg.

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 traded at 6.59 times estimated earnings, 30 percent below a three-year average of 9.42.

China’s non-manufacturing purchasing managers’ index fell to 53.9 in June from a previously reported 54.3 in May, according to report released today by the Beijing-based National Bureau of Statistics and the China Federation of Logistics and Purchasing. A reading above 50 indicates expansion.

‘Biggest Concern’

“The weakening Chinese economy is still the biggest concern among investors,” said Steven Leung, director of institutional sales at UOB-Kay Hian Holdings Ltd. in Hong Kong. “People are quite skeptical about the outlook and are discounting the prospect of a further slowdown.”

Goldman Sachs Group Inc., China International Capital Corp., Barclays Plc and HSBC Holdings Plc pared their China growth projections this year to 7.4 percent, below the government’s 7.5 percent goal.

The conditions exist for the nation to realize its economic targets for this year and for sustainable, healthy development, Premier Li said in a meeting with leaders from central and eastern Europe, according to a China Central Television report yesterday.

Mainland lenders declined. ICBC, as the world’s biggest bank is also known, sank 4 percent to HK$4.56. China Construction Bank Corp. slipped 2.5 percent to HK$5.15. Agricultural Bank of China Ltd. fell 4.4 percent to HK$3.01.

Developers declined after a government report showed the value of homes sold in Hong Kong last month plunged to HK$18.7 billion from HK$34.1 billion ($2.4 billion from $4.4 billion) a year ago.

Developers, Retailers

Sun Hung Kai dropped 2.3 percent to HK$97.70. Henderson Land Development Co., the Hong Kong builder controlled by billionaire Lee Shau-kee, sank 3.7 percent to HK$44.90. Sino Land Co. decreased 3.5 percent to HK$10.38.

The city’s retailers slid after a report showed the value of retail sales in May increased 12.8 percent from a year earlier, after rising 20.7 percent in April. The median estimate by economists surveyed by Bloomberg was for growth of 19.4 percent.

Luk Fook slipped 2.9 percent to HK$17.40. Chow Tai Fook Jewellery Group Ltd., the world’s biggest listed jewelry chain, fell 1.9 percent to HK$8.11. Hengdeli Holdings Ltd., a retail partner of Swatch Group AG, sank 4 percent to HK$1.70.

Futures on the S&P 500 Index retreated 0.7 percent after the U.S. measure yesterday slid 0.1 percent. Data today from the ADP Research Institute may indicate U.S. companies increased employment in June.

Hang Seng Index futures dropped 2.4 percent to 20,147. The HSI Volatility Index jumped 15 percent to 24.57, indicating traders expect a swing of 7 percent for the equity benchmark in the next 30 days.

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