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Most Hong Kong Stocks Drop on Low Year-End Trading Volume

Dec. 30 (Bloomberg) -- Most Hong Kong stocks fell in low year-end trading volume as declines by financial stocks weighed on the benchmark index amid expectations money-market rates will remain near record highs next quarter.

Bank of Communications Co. fell 1.3 percent. China Coal Energy Co. posted the largest drop on the Hang Seng Index, dropping 2.5 percent. Tencent Holdings Ltd. added 2.6 percent, extending gains after a report last week that it will jointly produce a smart TV that will connect users via its WeChat application. Kingbo Strike Ltd. surged 20 percent as shares of the engineering services provider debuted in Hong Kong.

More than twice as many stocks declined as gained on the Hang Seng Index at the close, which was little changed at 23,244.87 after rising as much as 0.5 percent. Volume was 37 percent below the 30-day average, with tomorrow the last trading day of the year. The Hang Seng China Enterprises Index, also known as the H-share index, slid 0.5 percent to 10,770.69 today.

“It’s a very quiet day on the news front today as most investors around the globe continue their holidays for the festive and New Year season,” Evan Lucas, a market strategist at IG Ltd., said in an e-mail. “I expect trade volume to remain low and therefore price action to be stronger in both directions, so positioning will be tricky.”

China’s benchmark money-market rate will probably remain near a record high in next quarter as policy makers seek to reduce debt, according to a Bloomberg survey. The seven-day repurchase rate will average 4.5 percent, the median of 11 estimates shows, close to the all-time high of 4.65 percent recorded over the three months that started Oct. 1.

Bank of Communications slid 1.3 percent to HK$5.40. China Construction Bank Corp., the nation’s second-largest lender, sank 1 percent to HK$5.85.

China Economy

The Hang Seng Index advanced 17 percent from its June low amid signs China’s economy is stabilizing and the U.S. recovery is gaining momentum. The measure traded at 11.1 times estimated earnings, compared with 16.7 for the Standard & Poor’s 500 Index as of the end of last week.

Conditions are in place to keep China’s economy and markets stable, and the government will implement prudent monetary policy and maintain “appropriate liquidity,” Premier Li Keqiang said during a Dec. 27 visit to Tianjin, according statement posted on the government’s website yesterday.

The H-share index, which climbed 21 percent from its June 25 low this year, traded at a multiple of 7.8 times profit. The gauge is headed for its first monthly loss since June on soaring funding costs in China. The gauge pared its December decline on Dec. 24 after the People’s Bank of China conducted its first reverse-repurchase agreements in three weeks, helping ease the tightest financing conditions since a record cash crunch in June.

Energy Shares

China Coal slid 2.5 percent to HK$4.34, while gas-supplier Kunlun Energy Co. dropped 2.3 percent to HK$13.44, as they led declines on the Hang Seng Index.

Futures on the S&P 500 were little changed today after the gauge slipped less than 0.1 percent on Dec. 27 from an all-time high the previous day amid optimism for the economic recovery.

Bullish options on the Hang Seng Index rose to a three-year high last week, according to one-month data compiled by Bloomberg. Calls betting on a 5 percent increase in the gauge cost 0.4 point more than puts protecting against a 5 percent decline Dec. 24, the highest since July 2010, the data showed.

Smart TV

Tencent climbed 2.6 percent to HK$495.80, capping a two-day gain of 5.7 percent. The company will produce smart TV integrated with its mobile messaging application WeChat, China Daily reported on Dec. 24. The television is expected to connect WeChat with 30 million Internet TV users in China, and will be produced with Future TV, a subsidiary of China Network Television and Skyworth Group, the report said.

Kingbo Strike jumped 20 percent to 60 Hong Kong cents on its first day of trading.

Biostime International Holdings Ltd. rose 0.1 percent to 68.9 Hong Kong cents before being suspended from trading today. The dairy company and had acquisition talks with the Nanshan-brand milk maker had acquisition talks three months ago, Business Media reported without saying where it got the information.

Futures on the Hang Seng Index declined 0.2 percent to 23,254. The Hang Seng Volatility Index dropped 0.2 percent to 14.81, indicating traders expect the benchmark equity index to swing 4.2 percent in the next 30 days.

To contact the reporter on this story: Adam Haigh in Sydney at ahaigh1@bloomberg.net

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

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