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Hong Kong Stocks Drop Most in Three Weeks on China Rates

Oct. 23 (Bloomberg) -- Hong Kong stocks fell the most in three weeks after China’s money-market rates jumped, while mainland developers slid on a report the government may add more measures to cool property prices.

Bank of Communications Co. fell 1.9 percent after China’s benchmark money-market rates jumped the most since July as the central bank refrained from adding funds. China Resources Land Ltd., the second-largest mainland property company traded in Hong Kong, slumped 2.9 percent. Cnooc Ltd., China’s No. 1 offshore energy explorer, dropped 3 percent after crude dropped for a third day. Chong Hing Bank Ltd. surged 7 percent after people with knowledge of the matter said Hong Kong’s smallest family-run lender is nearing an agreement to be bought out.

The Hang Seng Index fell 1.4 percent to 22,999.95 at the close, its biggest drop since Sept. 30. Three stocks slid for each that rose amid volume that was 18 percent more than its 30-day average. The Hang Seng China Enterprises Index, also known as the H-share index, slid 1.8 percent to 10,457.32. Stocks climbed earlier after slow gains in U.S. hiring boosted speculation the Federal Reserve will delay reducing stimulus.

“The surge in China’s short-term money rate is weighing on the market,” said Mari Oshidari, a Hong Kong-based strategist at Okasan Securities Group Inc. “Investors are expecting funds to continue to flow into Hong Kong on continued U.S. easing after weaker-than-expected jobs data.”

The Hang Seng Index climbed 16 percent from this year’s low in June amid signs growth in China is stabilizing. The equity benchmark traded at 11 times estimated earnings, compared with 15.9 for the Standard & Poor’s 500 Index yesterday.

China Rates

China’s seven-day repurchase rate, a gauge of funding availability in the banking system, surged 42 basis points, or 0.42 percentage point, to 4 percent as of 10:04 a.m. in Shanghai, according to the National Interbank Funding Center.

Bank of Communications dropped 1.9 percent to HK$5.60 after climbing as much 0.9 percent. China Minsheng Banking Corp., the nation’s first non-state lender, fell 1.1 percent to HK$8.94, reversing an earlier gain of as much as 2.5 percent.

Mainland developers slid. The central government may issue new property curbs this quarter and “hot-spot” cities may intensively fine-tune policies, according to a China Securities Journal report citing an unidentified analyst. Official data yesterday showed home prices rose in 69 of 70 cities surveyed.

China Resources Land fell 2.9 percent to HK$21.80. Shimao Property Holdings Ltd., controlled by billionaire Hui Wing Mau, retreated 5.6 percent to HK$18.70. Evergrande Real Estate Group Ltd., China’s biggest developer by revenue, fell 3.2 percent to HK$3.35.

Crude futures dropped as much as 0.7 percent today in a third day of declines as stockpiles swelled in the U.S. Cnooc fell 3 percent to HK$15.40. PetroChina Co., the nation’s No. 1 energy producer, retreated 1.8 percent to HK$8.94.

Stimulus Expectations

Futures on the S&P 500 fell 0.7 percent. The U.S. equity gauge rose 0.6 percent yesterday after payrolls climbed less than forecast in September. Barclays Plc changed its estimate for the start of tapering to March from December after the release of the jobs data, which was delayed by the 16-day government shutdown. The Fed in September refrained from reducing its $85 billion in monthly bond purchases, saying it needed more evidence of economic recovery.

Among stocks that rose, Tingyi (Cayman Islands) Holding Corp., a maker of instant noodles and drinks, climbed 1.9 percent to HK$21.25 to lead gains on the Hang Seng Index. The company said more than 35 production lines were added to accelerate distribution of PepsiCo Inc. beverages.

Chong Hing

Chong Hing Bank surged 7 percent to HK$37.40. The stock jumped in late trading after people familiar with the matter said Yue Xiu Group, an arm of China’s Guangzhou city government, is nearing an deal to buy the lender. The first acquisition of a Hong Kong bank since 2009 would give Yue Xiu a network of 53 branches, including one in Macau.

Futures on the Hang Seng Index slid 1.3 percent to 22,996. The Hang Seng Volatility Index soared 7.1 percent to 16.06, indicating traders expect the benchmark equity index to swing 4.6 percent 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: Sarah McDonald at smcdonald23@bloomberg.net

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