April 11 (Bloomberg) -- Hong Kong stocks fell, with the benchmark index retreating from a three-month high, as Tencent Holdings Ltd. declined after a U.S. technology selloff resumed. Hong Kong Exchanges & Clearing Ltd. soared.
Tencent, Asia’s biggest Internet company, dropped 6.7 percent, making it the biggest drag on the Hang Seng Index. BYD Co. fell 1.7 percent after the Hong Kong Economic Journal reported that the electric-car maker’s sales dropped 25 percent from a year earlier in March. Hong Kong Exchanges jumped 12 percent, heading for its biggest advance since December 2008, as it resumed trading after China yesterday unveiled plans for cross-border share investing through Hong Kong and Shanghai.
The Hang Seng Index lost 0.8 percent to 23,003.64 at the close, paring its weekly gain to 2.2 percent. The Hang Seng China Enterprises Index, also known as the H-share index, slid 1.9 percent to 10,228.42, its biggest decline in two months. The Nasdaq Composite Index fell the most since 2011 yesterday in New York, leading technology stocks across Asia lower.
“Nasdaq’s big drop dragged the Hong Kong market today following yesterday’s enthusiastic day when the link between the Hong Kong and Shanghai bourses was announced,” Jackson Wong, vice president of Tanrich Securities Co. in Hong Kong, said by phone. “Hong Kong Exchanges is the biggest beneficiary of the link. We see trading volumes increasing.”
The Hang Seng Index has declined 1.3 percent this year as China endures its sharpest economic slowdown since the global financial crisis. The gauge traded at 10.7 times estimated earnings yesterday, compared with 15.6 times for the Standard & Poor’s 500 Index.
Futures on the S&P 500 added 0.1 percent. The U.S. equity gauge dropped 2.1 percent yesterday, its biggest slide in two months, as technology shares sank amid concern valuations may be too high at the start of earnings season. The Nasdaq Composite Index tumbled 3.1 percent. The gauge trades at 35 times reported earnings of the companies in the index, double the ratio for the S&P 500.
Tencent dropped 6.7 percent to HK$525, its biggest decline since November 2012. The stock has fallen 17 percent from its all-time high of HK$635 set on March 6.
Premier Li Keqiang said yesterday that China will roll out more policies to support growth while avoiding stronger stimulus. The government is taking steps including railway spending and tax relief to support growth while avoiding monetary measures such as cutting banks’ reserve requirements or the scale of actions used to counter the financial crisis.
China yesterday said it would allow a combined 23.5 billion yuan ($3.8 billion) of daily cross-border trading. The tie-up is part of efforts to free up capital flows in the world’s second-biggest economy, after the ruling Communist Party in November pledged the most sweeping reform package since at least the 1990s and in March widened the yuan’s trading band.
Authorities are also trying to revive confidence in stocks as the Shanghai Composite traded 65 percent below its 2007 peak as of yesterday and valuations of Chinese shares in Hong Kong languish near the lowest since 2001.
Li said yesterday the link will lead to deeper integration with international markets. The valuation gap between dual-listed companies in the two bourses narrowed further as investors bet that money will flow to the most-favored companies on each exchange. The Hang Seng China AH Premium Index rose 1.3 percent to 96.58, closer to the 100 level that signals parity between Shanghai and Hong Kong listed shares.
Chinese insurers in Hong Kong declined as the valuation gap with their mainland shares narrowed. Ping An Insurance (Group) Co. dropped 5 percent to HK$61.40. China Life Insurance Co. both fell 5.3 percent to HK$21.55.
Reports showed Chinese consumer prices rose 2.4 percent in March from a year earlier, after gaining 2 percent in February, meeting economists’ estimates compiled by Bloomberg. The nation’s producer-price index retreated 2.3 percent following the previous month’s 2 percent drop. Data yesterday showed exports from China fell 6.6 percent in March, with economists expecting a gain of 4.8 percent.
BYD slipped 1.7 percent to HK$51.10. The company’s sales last month fell 25 percent from year earlier to 39,000 vehicles, the Hong Kong Economic Journal reported, citing Li Yunfei, deputy general manager of the sales division.
Among shares that rose, Hong Kong Exchanges jumped 12 percent to HK$146. A deal linking Shanghai and Hong Kong markets gives Chinese investors unprecedented access to Macau casino stocks and companies like Tencent. The announcement is a boost to efforts by Hong Kong bourse head Charles Li to position the city as the investment gateway to the fastest-growing major economy.
“Once implemented, it is likely we’ll see liquidity improve and the valuation gap between A and H shares will be arbitraged,” John Ford, the chief investment officer for Asia Pacific at Fidelity Worldwide Investment, said by e-mail. Yuan-denominated stocks on mainland exchanges are known as A shares, while H shares refer to Chinese companies listed in Hong Kong.
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