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Hong Kong Stocks Drop Amid Impasse Over U.S. Debt Limit

Oct. 7 (Bloomberg) -- Hong Kong stocks fell, extending last week’s losses, as the political impasse over the U.S. debt limit and government shutdown weighed on investor sentiment.

Techtronic Industries Co., a maker of power tools that gets 73 percent of sales from North America, slid 2 percent. Cnooc Ltd., China’s biggest offshore oil explorer, fell 1.1 percent as crude oil dropped as Gulf of Mexico production resumed after a tropical storm weakened. Sun Hung Kai Properties Ltd. sank 2.6 percent after the Hong Kong Economic Journal said the developer offered unsold apartments at a discount.

The Hang Seng Index lost 0.7 percent to 22,973.95 at the close in Hong Kong after falling 0.3 percent last week. The Hang Seng China Enterprises Index, also known as the H-share index, declined 0.9 percent. Mainland markets are shut until tomorrow. U.S. House of Representatives Speaker John Boehner said lawmakers won’t raise the debt ceiling without packaging it with other provisions.

“With things evolving as they do, it’s probably time to get a little bit worried,” Arnout Van Rijn, chief investment officer for Robeco Groep NV’s Hong Kong division, said in a Bloomberg Television interview. The firm oversees $200 billion globally. “What’s going to happen to U.S. interest rates now? That will have an impact on how markets are going to behave.”

The Hang Seng Index gained 1.4 percent this year on better-than-expected Chinese data and after the Federal Reserve unexpectedly refrained from cutting stimulus. Hong Kong’s benchmark equity gauge traded at 11 times estimated earnings, compared with 15.2 for the Standard & Poor’s 500 Index.

Budget Impasse

Futures on the U.S. equity gauge fell 1 percent today. The index posted its second weekly decline last week as the first partial government shutdown in 17 years began. The budget impasse has raised concern lawmakers will be unable to agree on increasing the $16.7 trillion debt limit. The Treasury Department has said measures to avoid exceeding the cap will be exhausted by Oct. 17.

Data from payrolls to retail sales will be delayed as long as the shutdown continues, making it harder to assess the economy as the central bank considers when to start paring unprecedented monetary stimulus. Fed San Francisco President John Williams estimated a two-week government halt would shave 0.25 percentage point off fourth-quarter economic growth.

Shares linked to the U.S. retreated. Techtronic dropped 2 percent to HK$19.94. Li & Fung Ltd., which supplies clothing and toys to retailers including Wal-Mart Stores Inc., lost 1 percent to HK$11.20.

Storm Downgrade

Crude prices fell after Tropical Storm Karen was downgraded Oct. 5 and passed by offshore assets, reopening platforms across the Gulf after halting almost 62 percent of the region’s oil output. Cnooc dropped 1.1 percent to HK$15.84. PetroChina Co. slid 0.7 percent to HK$8.55.

Sun Hung Kai lost 2.5 percent to HK$102.50 after the Hong Kong Economic Journal reported it offered to sell some units at a residential project at about 30 percent discount, the biggest price cut since the city’s latest rule on new flat sales became effective.

Among stocks that advanced, casino operators gained as Macau visitor arrivals from China rose 11 percent from a year earlier during the holidays from Oct. 1 to Oct. 6, according to the tourism office. MGM China Holdings Ltd., a gaming company controlled by MGM Resorts International, surged 5 percent to HK$27.25. Melco Crown Entertainment Ltd., a venture between Macau casino mogul Lawrence Ho and Australian billionaire James Packer, jumped 4.6 percent to HK$88.10.

Futures on the Hang Seng Index dropped 0.9 percent to 22,902. The HSI Volatility Index gained 6.9 percent to 18.30, its highest since Sept. 4. The level indicates traders expect the benchmark equity index to swing 5.2 percent in the next 30 days.

To contact the reporters on this story: Jonathan Burgos in Singapore at jburgos4@bloomberg.net; Eleni Himaras in Hong Kong at ehimaras@bloomberg.net

To contact the editor responsible for this story: Sarah McDonald at smcdonald23@bloomberg.net

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