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Hong Kong Stocks Slide to Two-Month Low as Shenhua Drops

Jan. 6 (Bloomberg) -- Hong Kong stocks fell, with the city’s benchmark index closing at an almost two-month low, after a private gauge of China’s services industries declined.

Industrial & Commercial Bank of China Ltd., the nation’s biggest lender, slipped 2 percent. China Shenhua Energy Co., the largest coal producer, dropped 2.2 percent after BNP Paribas SA joined Jefferies Hong Kong Ltd. in predicting a decline in prices of the fuel this year. China Railway Group Ltd. sank 4.1 percent after the president of the country’s No. 2 builder of train lines died.

The Hang Seng Index lost 0.6 percent to 22,684.15, the lowest close since Nov. 14. The gauge dropped 2.2 percent on Jan. 3, its steepest decline since July 3, after an official gauge of China’s services industries fell to a four-month low. Trading volume on the measure was about 17 percent higher than the 30-day average, according to data compiled by Bloomberg.

“Investors are waiting for positive news,” Andrew Sullivan, a Hong Kong-based director of sales trading at Kim Eng Securities, said by telephone. “With the Chinese economy slowing, there would be less demand for electricity. That’s why we’re seeing coal stocks under pressure.”

China’s services purchasing managers’ index fell to 50.9 in December from 52.5 in November, according to a report released today by HSBC Holdings Plc and Markit Economics. A reading above 50 represents an expansion.

The Hang Seng China Enterprises Index of mainland shares traded in the city, also known as the H-share index, slumped 1.4 percent to 10,290.55, extending its three-day loss to 4.9 percent, the most since June 24.

Relative Value

The Hang Seng Index traded at 10 times estimated earnings today, compared with 15.5 for the Standard & Poor’s 500 Index on Jan. 3.

Hong Kong stocks are poised to gain in 2014, with the Hang Seng Index climbing to a five-year high on a stronger global economy and steady growth in China as it pushes forward with policy changes, according to strategists. The city’s benchmark equity index will advance 10 percent to 25,658 this year from the end of 2013, according to the average of eight analyst estimates compiled by Bloomberg.

Futures on the S&P 500 added 0.1 percent today. The gauge declined less than 1 point on Jan. 3 as investors weighed comments from Federal Reserve officials on stimulus and the economy’s strength. The benchmark measure surged 30 percent in 2013 for its steepest annual rally in 16 years.

Chinese lenders declined. ICBC slid 2 percent to HK$4.96. China Construction Bank Corp., the nation’s second-largest lender, dropped 1.6 percent to HK$5.59. Agricultural Bank of China Ltd. decreased 2.5 percent to HK$3.58.

Wing Hang Bid

Wing Hang Bank Ltd. fell 1.4 percent to HK$115.60 before trading was halted. Oversea-Chinese Banking Corp., Singapore’s second-biggest lender, offered less for the Hong Kong lender than the price Wing Hang was seeking, two people with knowledge of the matter said on Jan. 3.

The nation’s coal producers extended losses after BNP Paribas analyst Daisy Zhang said the fuel’s prices may extend declines in the near term amid stable inventory at Qinhuangdao Port and rising production in Shanxi province. China Shenhua slid 2.2 percent to HK$22.35, declining for a third day. China Coal Energy Co. lost 1.5 percent to HK$4.06.

China Railway Group dropped 4.1 percent to HK$3.75. The operation of the company remains normal and the chairman will assume the responsibilities of deceased president Bai Zhongren before a new appointment, according to a company statement. The company didn’t disclose details of Bai’s death.

Among stocks that rose, Guangzhou Automobile Group Co., the Chinese partner of Toyota Motor Corp., climbed 3.3 percent to HK$8.67 after reporting vehicle sales in December almost doubled.

To contact the reporter on this story: Jonathan Burgos in Singapore at jburgos4@bloomberg.net

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

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