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Hong Kong H-Shares Drop as Automakers Fall; Casinos Rise

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July 21 (Bloomberg) -- Chinese stocks in Hong Kong dropped the most in almost two weeks as automakers led declines. Casino shares climbed on the city’s benchmark gauge.

Dongfeng Motor Group Co., which this month climbed to a two-year high, slid 5.1 percent. China Unicom (Hong Kong) Ltd., the mainland’s second-largest mobile carrier, lost 1.3 percent after subscriber growth slowed. China Coal Energy Co. fell 1.2 percent after saying it expects first-half net-income to drop as much as 75 percent. Galaxy Entertainment Group Ltd., a gaming company controlled by billionaire Lui Che-woo, rose 3.1 percent to lead gains on the Hang Seng Index.

The Hang Seng China Enterprises Index, also known as the H-share index, fell 0.8 percent to 10,355.73 at the close, its biggest drop since July 9. The Hang Seng Index slipped 0.3 percent to 23,387.14, with volume 20 percent lower than the 30-day average. About 330 companies on the Hang Seng Composite Index are scheduled to report earnings from this week through the end of August, according to data compiled by Bloomberg.

“The Hong Kong stock market entered the results-reporting period so investors will remain focused on individual companies,” said Ben Kwong, director of brokerage KGI Asia Ltd. “Investors remain relatively cautious because of the geopolitical situation, while the market is lacking catalysts. Wall Street remained firm, which is positive for other stock markets.”

Futures on the Standard & Poor’s 500 Index dropped 0.3 percent. The underlying gauge rose 1 percent on July 18 as it rebounded after a passenger jet was shot down in Ukraine and Israel’s invasion of Gaza roiled markets. Google Inc. advanced after revenue beat estimates.

Targeted Stimulus

The Hang Seng Index advanced 0.4 percent this year, reversing losses of as much as 9.1 percent as China’s government deployed targeted stimulus to prop up growth. The gauge traded at 10.9 times estimated earnings today, compared with 7.2 for the H-share index and 16.6 for the S&P 500 on July 18.

China’s economic expansion may stabilize at about 6 percent in the future after investment growth slows to normal levels, Shanghai Securities News reported, citing Liu Shijin, vice head of Development Research Center of the State Council. Home demand may peak this year, the report also cited Liu as saying.

Dongfeng Motor dropped 5.1 percent to HK$13.72. Guangzhou Automobile Group Co., a Toyota Motor Corp. partner, retreated 3.2 percent to HK$8.76. Four of the 10 biggest decliners on the H-share gauge were automakers.

China Unicom slipped 1.3 percent to HK$12.64 after the mobile carrier said it added fewer customers in June than in the month before. China Coal retreated 1.2 percent to HK$4.07 after saying first-half profit will fall on lower prices and sluggish demand.

Gaming Stocks

Casino operators led gains on Hong Kong’s benchmark index, with Galaxy rising 3.1 percent to HK$63.30 and Sands China Ltd. increasing 2.3 percent to HK$55.50. Both stocks dropped on July 18 to their lowest in at least three weeks.

Semiconductor Manufacturing International Corp. rose 2.7 percent to 77 Hong Kong cents after raising its second-quarter gross margin guidance to 27 percent to 29 percent, from 22 percent to 24 percent.

Hydoo International Holding Ltd. was suspended from trading today for a second time in July. The trade-center operator tumbled 34 percent on July 18 as it resumed trading after saying its chairman has been unreachable since early this month.

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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