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Hong Kong Stocks Fall From 5-Month High; Casinos Rebound

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June 11 (Bloomberg) -- Hong Kong stocks fell, with the benchmark index retreating from its highest since January, as China Mobile Ltd. dragged the measure lower. Macau casino operators rebounded after yesterday’s drop.

China Mobile, the world’s largest mobile-phone carrier by subscribers, dropped 2.1 percent to lead a measure of telecommunications companies lower on the Hang Seng Composite Index. Beijing Enterprises Holdings Ltd. retreated 4 percent after saying its controlling shareholder will issue exchangeable bonds. Sands China Ltd. climbed 3.6 percent after Credit Suisse Group AG recommended the gaming company’s shares, calling the recent selloff excessive.

The Hang Seng Index lost 0.3 percent to 23,257.29 at the close in Hong Kong. The gauge climbed 0.9 percent yesterday to erase this year’s loss. The Hang Seng China Enterprises Index, also known as the H-share index, today slid 0.1 percent to 10,508.40. Zhejiang Shibao Co. surged 11 percent amid a rally for H-shares that are cheaper than mainland counterparts.

“There may be some profit-taking by short punters but in the medium-term Hong Kong valuations are still reasonable,” said Louis Tse, a Hong Kong-based director at VC Brokerage Ltd. “Gradual, mini economic stimulus coming from China is giving quite a bit of support for the market.”

Hong Kong’s benchmark rebounded after falling as much as 9.1 percent this year as China introduced stimulus including reserve-ratio cuts to boost the economy. The equity gauge traded at 10.8 times estimated earnings, compared with 16.5 for the Standard & Poor’s 500 Index yesterday.

Reserve Ratios

People’s Bank of China this week announced a 0.5 percentage-point cut in reserve requirements for some banks, with the aim of supporting smaller companies and agricultural borrowers. The reduction will take effect next week and will add 70 billion yuan ($11.2 billion) to the financial system, according to HSBC Holdings Plc.

China Mobile dropped 2.1 percent to HK$75.15. A gauge of telecommunications shares fell 1.5 percent, the biggest decline among the Hang Seng Composite Index’s 11 industry groups.

Beijing Enterprises dropped 4 percent to HK$72.45, a four-month low. Controlling shareholder BE Group BVI plans to issue HK$4.3 billion ($555 million) in exchangeable bonds.

Some Chinese companies in Hong Kong surged in late trading, narrowing the discounts on their H-shares to their mainland-listed stock. Zhejiang Shibao jumped 11 percent to HK$5.20. Even after today’s gain, the auto-part maker’s stock is 80 percent cheaper in Hong Kong than in Shenzhen, data compiled by Bloomberg show. Shandong Molong Petroleum Machinery Co., which trades at an 72 percent discount in Hong Kong, jumped 7.3 percent to HK$2.79.

China Shares

China’s mainland-traded shares won’t be included in MSCI’s emerging-markets index, the index provider said in a statement yesterday. MSCI, which based its decision on limitations to investing in China’s so-called A shares, may consider inclusion next year, it said.

Sands China gained 3.6 percent to HK$53.70 after declining 2 percent yesterday. Credit Suisse recommended buying the shares along with those of MGM China Holdings Ltd., citing strong growth in the Macau mass-gaming market. MGM advanced 3.4 percent to HK$24.70.

Casino operators in Macau dropped yesterday after SJM Holdings Ltd. said regulators were cracking down on the use of China UnionPay Co.’s debit cards, curbing money flows to the world’s largest gambling hub.

The World Bank yesterday cut its global growth forecast amid weaker outlooks for the U.S., Russia and China. The lender projected 2.8 percent growth for the world economy this year compared with a 3.2 percent estimate in January. The forecast for China’s expansion was lowered to 7.6 percent from 7.7 percent, with the government’s official target at 7.5 percent.

Futures on the S&P 500 Index slipped 0.2 percent today. The U.S. equity benchmark fell less than one point yesterday, halting a four-day streak of record-high closes, as investors weighed equity valuations.

To contact the reporter on this story: Kana Nishizawa in Hong Kong at knishizawa5@bloomberg.net

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

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