Hong Kong stocks fell for the first time in three days ahead of China’s inflation data tomorrow and as better-than-forecast U.S. jobs data fueled speculation the Federal Reserve may begin paring stimulus this year.
Zijin Mining Group Co., China’s largest gold producer by market value, slumped 7 percent after saying it expects first-half profit to tumble. Hang Lung Properties Ltd., a Hong Kong-based developer that invests in mainland shopping malls, fell 3.8 percent, leading declines in the sector after jumping 4.1 percent on July 5. Yue Yuen Industrial (Holdings) Ltd., which makes shoes for Nike Inc., dropped 2.2 percent.
The Hang Seng Index slid 1.3 percent to 20,582.19 at the close after capping its biggest two-day advance in a year on July 5. All but five stocks dropped on the 50-member gauge, with volume 17 percent below the 30-day average. The Hang Seng China Enterprises Index, down more than 20 percent from the year’s high, retreated 1.6 percent to 9,063.30.
“Investors are unwinding their portfolios because people are now expecting higher interest rates from the U.S. by the end of the third quarter,” said Benjamin Tam, a Hong Kong-based fund manager who helps oversees about $1.5 billion at IG Investment. “There are a lot of China macro data to be announced this week and people are still worrying about a further slowdown in the second quarter.”
The Hang Seng Index last month posted its biggest quarterly decline since 2011 as China’s money-market rates surged to a record and after Fed Chairman Ben S. Bernanke said policy makers may start tapering stimulus if the U.S. economy shows sustained improvement.
China’s statistics bureau is scheduled to release June inflation data tomorrow. Consumer prices probably rose 2.5 percent last month, compared with a 2.1 percent gain in May, according to the median estimate of 31 economists in a Bloomberg survey. China’s second-quarter growth may slow to about 7.5 percent, and June exports may be relatively weak, China Securities Journal reported, citing an unidentified person.
The Hang Seng China Enterprises Index, also known as the H-share index, closed 26 percent below its Feb. 1 high, with a 20 percent drop meeting some investors’ definition of a bear market. The measure traded at 1.09 times the value of net assets, near levels not seen since the depths of the 2008 global financial crisis.
Shares on benchmark Hang Seng Index traded at 9.76 times estimated earnings, compared with multiples of 14.81 for the Standard & Poor’s 500 Index and 12.9 for the Stoxx Europe 600 Index, according to data compiled by Bloomberg.
The Hang Seng Composite Index, the city’s broadest equity measure, is down 9.7 percent this year through July 5, led by resources and energy companies. Information technology and utilities are the only sectors of the gauge’s 11 industry groups to have gained this year.
Futures on the Standard & Poor’s 500 Index rose 0.3 percent after gaining 1 percent on July 5. U.S. payrolls rose by 195,000 workers for a second straight month, the Labor Department reported July 5, exceeding estimates for a 165,000 gain in a Bloomberg survey. The Fed’s Bernanke is due to speak this week amid speculation signs of growth will compel the central bank to slow stimulus.
Stocks linked to the U.S. slid. Yue Yuen dropped 2.2 percent to HK$19.50. Li & Fung Ltd., a supplier of toys and clothes to Wal-Mart Stores Inc., lost 1.5 percent to HK$10.90.
China Shenhua Energy Co., the nation’s biggest coal miner by market value, dropped 2.5 percent to HK$19.98. The government has finished plans for a carbon tax that will be released when consumer prices “enter a downward channel,” Shanghai Securities News reported, citing an unidentified person. Yanzhou Coal Mining Co., the third-largest coal miner, retreated 3.4 percent to HK$5.37.
Goldman Sachs Group Inc. cut its 2013-15 earnings forecasts for China’s mining and metal companies, citing lower estimates for gold and copper prices and sales volume.
Zijin Mining tumbled 7 percent to HK$1.47. The company said first-half profit may plunge as much as 55 percent on falling gold and copper prices, as well as higher costs.
Developers had the biggest drop among the Hang Seng Index’s industry groups. Hang Lung Properties slid 3.8 percent to HK$25.50, leading the city’s benchmark gauge lower. Sino Land Co., a Hong Kong builder controlled by billionaire Robert Ng, lost 3.2 percent to HK$10.22.
“People are expecting a slower property market in the second half,” with expectations of more real-estate curbs and higher U.S. interest rates hurting investor sentiment, Tam said. Hong Kong’s interest rates follow the Fed’s lead because the city’s currency is pegged to the greenback.
China’s second-quarter growth may slow to about 7.5 percent, and June exports may be relatively weak, China Securities Journal reported, citing an unidentified person. Goldman Sachs Group Inc., China International Capital Corp., Barclays Plc and HSBC Holdings Plc last month pared their annual growth projections this year to 7.4 percent, below the government’s 7.5 percent goal.
Hang Seng Index futures dropped 1.5 percent to 20,492. The HSI Volatility Index jumped 7.2 percent to 24.55, indicating traders expect a swing of 7 percent for the equity benchmark in the next 30 days.
“The market is focusing on China’s economic indicators on worries there will be a further slowdown,” said Kenny Tang, Hong Kong-based general manager of AMTD Financial Planning Ltd. “For the Hang Seng Index, resistance of 21,000 level will remain after rising sharply last week.”