Hong Kong Stocks Retreat From Six-Year High on China Data

Hong Kong stocks fell, with the city’s benchmark index retreating from a six-year high, after a China manufacturing report was weaker than expected.

China Shenhua Energy Co. slid 1.5 percent, with the coal miner erasing gains after the factory activity data. China Resources Enterprise Ltd. dropped 2.9 percent after the brewer and retailer forecast a sharp decline in profit. Biostime International Holdings Ltd., which produces baby-care products, slumped 8.5 percent on analyst downgrades. ZTE Corp., China’s second-largest maker of phone-network equipment, rose 2.4 percent after posting higher first-half net income.

The Hang Seng Index sank 0.7 percent to 24,994.10 at the close after yesterday climbing to its highest since May 2008. The MSCI Hong Kong Index fell 0.9 percent after ending yesterday at an all-time high. The Hang Seng China Enterprises Index, also known as the H-share index, lost 1 percent to 10,942.37.

“China is still in a recovery mode, but the momentum has slowed,” Wang Tao, Hong-Kong based head of China economic research at UBS AG told Bloomberg TV. “The summer rebound is taking a breath. The recovery is still on track, but it is not that strong.”

A preliminary gauge of August China factory activity from HSBC Holdings Plc and Markit Economics today showed slid to a three-month low of 50.3 from 51.7 in July, missing estimates for a reading of 51.5 in a Bloomberg survey of economists. Figures above 50 signal expansion.

Coal producers declined. China Shenhua, China’s biggest producer of the fuel, slipped 1.5 percent to HK$22.95 after rising as much as 0.4 percent. Yanzhou Coal Mining Co. dropped 0.9 percent to HK$6.68.

Weakening Data

An official report released Aug. 18 showed non-financial foreign direct investment in China dropped 17 percent, missing analysts’ expectations for a 0.8 percent increase. Mainland data from new credit to industrial output released last week was weaker than expected. New-home prices in July fell in most cities even as local governments eased property curbs.

The H-share gauge rose 19 percent from this year’s low in March amid speculation China will add stimulus to meet its economic growth target. The index traded at 7.6 times estimated earnings as of today compared with 11.5 for the Hang Seng Index and 16.6 on the Standard & Poor’s 500 Index yesterday.

China Resources Enterprise, the partner of Tesco Plc and SABMiller Plc in the mainland, fell 2.9 percent to HK$23.25 after reporting results during today’s trading break. The company said it expected a significant drop in full-year net income, and missed estimates with a 34 percent decline in first-half underlying profit to HK$668 million ($86.2 million).

Biostime, Techtronic

Biostime tumbled 8.5 percent to HK$30.25, the lowest close since January 2013. Standard Chartered Plc reduced its rating on the stock to underperform from outperform, while Jefferies Group LLC and Deutsche Bank AG downgraded the shares to hold from buy on disappointing six-month earnings.

Techtronic Industries Co. plunged 5.8 percent to HK$24.25 after Bank of America Merrill Lynch cut the power-tool maker’s equity rating.

Among stocks that advanced, ZTE gained 2.4 percent to HK$17.10. First-half net income increased to 1.1 billion yuan ($179 million) from 310 million yuan a year ago.

Futures on the S&P 500 gained 0.1 percent today. The U.S. equity benchmark yesterday rose 0.3 percent to close within two points of a record high.

Stimulus Outlook

In minutes from the Federal Reserve’s July meeting, officials said aggressive stimulus may end sooner than anticipated while acknowledging continued slack in the jobs market. Weak wage growth and low inflation have provided room to hold rates near zero even as growth shows signs of accelerating. The central bank is on pace to end its monthly bond purchases in October, and plans to keep rates low for a “considerable time” afterward.

Fed Chair Janet Yellen will give a speech on labor markets tomorrow at a symposium of global central bankers in Jackson Hole, Wyoming.

China may convert most state enterprises to mixed private-public ownership, China Securities Journal reported, citing Peng Jianguo, a state official. Separately, the government plans to cut pay by as much as half for top executives at major state-controlled companies, according to a report from South China Morning Post, citing unidentified people.

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