Hong Kong Stocks Decline Before European Summit on Debt Crisis
Hong Kong stocks (HSI) fell ahead of a summit on Europe’s debt crisis and as the European Banking Authority prepares to publish its review of how much capital lenders should raise to absorb losses from euro-area bonds.
HSBC Holdings Plc (HSBA), Europe’s biggest lender by market value, slipped 0.9 percent. China Resources Power Holdings Co., a mainland power producer, fell 1.7 percent ahead of a report that may show the country’s industrial production slowed last month. Air China Ltd. (601111), the world’s No. 1 carrier by market value, dropped 2.3 percent after the International Air Transport Association predicted a drop in industry profits.
“People are somewhat more cautious,” said Terrace Chum, Hong Kong-based managing director of greater China equities for Manulife Asset Management, which oversees $199 billion. “Europe will continue to be a drag as problems there aren’t going to be resolved so soon.”
The Hang Seng Index fell 0.7 percent to 19,107.81 at the 4 p.m. close in Hong Kong, with four shares dropping for each that rose in the 48-member gauge. The measure advanced 7.6 percent last week as China lowered reserve requirements for lenders and the Federal Reserve led five other central banks in cutting the cost of emergency funding for European lenders.
The Hang Seng China Enterprises Index (HSCEI) of mainland companies listed in Hong Kong slipped 0.9 percent to 10,395.37.
Companies that receive revenue from Europe retreated as the region’s leaders struggle to resolve the sovereign debt crisis. The European Central Bank may announce a range of measures today to stimulate lending and boost the flow of credit, said three euro-area officials with knowledge of policy makers’ deliberations.
HSBC fell 0.9 percent to HK$62.35. Cosco Pacific Ltd., which operates container facilities in Greece, dropped 0.9 percent to HK$9.33.
Standard Chartered Plc, a London-based lender that gets about 57 percent of its sales from the Asia Pacific, fell 1.2 percent to HK$174.80. The bank trimmed its full-year forecast for revenue growth, citing the depreciation of Asian currencies’ against the U.S. dollar.
European leaders will tackle the sovereign-debt problems at a two-day summit that begins today in Brussels. At the same time, the European Banking Authority will release updated results of stress tests conducted on lenders.
“As the meetings get closer, investors have turned cautious,” said Masaru Hamasaki, who helps oversee the equivalent of $24 billion as chief strategist at Toyota Asset Management Co. in Tokyo. “There’s been a switch from a feeling that we were going to get some visibility on the situation to a cooler stance, where people are in a wait-and-see mood.”
Chinese utility companies declined ahead of a report tomorrow that’s expected to show the nation’s industrial output expanded in November at the weakest pace since August 2009 and inflation slowed.
China Resources Power dropped 1.7 percent to HK$13.54. Datang International Power Generation Co. (991) declined 2.4 percent to HK$2.44.
Shares of airlines dropped after the IATA predicted industry profit next year will fall 49 percent to $3.5 billion as Europe’s debt crisis slows economic growth. The group forecast in September that global airline earnings in 2012 would total $4.9 billion.
Air China decreased 2.3 percent to HK$6.06. China Southern Airlines Co. (1055), the nation’s second-largest carrier by assets, slipped 0.9 percent to HK$4.21. China Eastern Airlines Co. fell 1.3 percent to HK$2.98.
The Hang Seng Index has tumbled 17 percent this year amid concern Europe’s debt crisis is worsening. Companies in the index traded at 10.4 times estimated earnings, down from 14.4 times on Dec. 31, according to Bloomberg data. The Standard & Poor’s 500 Index trades at 12.7 times.
Futures on the Hang Seng Index slid 0.5 percent to 19,100. The HSI Volatility Index climbed 3 percent to 29.69, indicating options traders expect a swing of 8.5 percent in the benchmark index over the next 30 days.
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