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Hong Kong Stocks Drop After Factory Output, Retail Sales

March 13 (Bloomberg) -- Hong Kong stocks declined, with the benchmark Hang Seng Index reversing gains after data showed Chinese industrial production and retail sales missed estimates.

The Hang Seng Index fell 0.7 percent to 21,756.08 at the close in Hong Kong, erasing a gain of 0.6 percent. The Hang Seng China Enterprises Index, also known as the H-share index, dropped 0.4 percent to 9,322.93 after rising as much as 1.8 percent. The gauge closed at the lowest since July 10, dropping 19 percent from a Dec. 2 peak as it neared the 20 percent drop that some traders consider a bear market.

“The markets are very fragile around China,” Peter Esho, Sydney-based chief market analyst at Invast Securities Co., said by phone. “Both industrial production and retail sales numbers today are soft, but not as bad as they could have been.”

China’s factory production rose 8.6 percent in the January-February period from a year earlier, according to the National Bureau of Statistics. Analysts surveyed by Bloomberg expected a 9.5 percent expansion. Retail sales advanced 11.8 percent, while fixed-asset investment excluding rural households was up 17.9 percent.

Disappointing China data is fueling speculation the nation may not meet its economic-expansion target. Aggregate financing slumped to 938.7 billion yuan ($153 billion) in February from a record 2.58 trillion yuan the month before, a report this week showed. Exports slid the most since 2009 last month, according to data released over the weekend.

Low Valuations

H-shares are valued at 1.1 times net assets, the biggest discount since September 2003 to the MSCI All-Country World Index of developed and emerging shares, which has a multiple of 2. The H-share gauge traded at 6.31 times estimated earnings and the Hang Seng Index had a multiple of 9.85, compared with 15.9 for the Standard & Poor’s 500 Index yesterday.

“I’m a big buyer of China,” said Nader Naeimi, Sydney-based head of dynamic asset allocation at AMP Capital, which manages $131 billion. “From a valuation point they are so cheap. These levels are great.”

China Overseas Land & Investment Ltd. declined 4.1 percent to HK$18.80, leading the Hang Seng Index lower. The biggest state-owned developer reported full-year underlying profit of HK$19 billion, missing the HK$19.7 billion estimate in a Bloomberg survey.

Financial shares pared advances after the factory and retail data was released today. China Construction Bank Corp. fell 0.2 percent to HK$5.04, erasing gains of as much as 2 percent. Bank of China lost 0.3 percent to HK$3.11 after rising as much as 1.6 percent.

MSCI Plan

MSCI Inc.’s proposal to include China’s mainland-traded shares in its emerging-market indexes may lure $4.4 billion in funds. MSCI is consulting with investors, who use the company’s indexes to measure performance, on the plan as China takes steps to open up its $3.2 trillion stock market to foreign money managers.

Ping An Insurance Group Co. climbed 1 percent to HK$61.10 ahead of its scheduled earnings report today. The company would probably receive the most inflows under the proposals by MSCI, Societe Generale SA wrote in a report dated yesterday.

Futures on the S&P 500 climbed 0.2 percent. The U.S. equities benchmark rose less than 0.1 percent yesterday as investors watched developments in Ukraine and weighed prospects for global economic growth.

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

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

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