Hong Kong Stocks Snap Two-Day Gain Amid Global Growth Concern
Hong Kong stocks fell, with the Hang Seng Index (HSI) heading for its first loss in three days, as U.S. home sales trailed estimates and on speculation China’s Premier Wen Jiabao will lower the target for economic growth this year.
Techtronic Industries Co. (669), maker of power tools that counts North America as its biggest market, slipped 1.7 percent. Country Garden Holdings Co. (2007) dipped 4.1 percent, leading a drop among Chinese developers after Shanghai’s government said it will maintain home-buying restrictions. Esprit Holdings Ltd. (330), a Hong Kong-based clothier that counts Europe as its biggest market, surged 25 percent after beating its target for operating-profit margins.
The Hang Seng Index slipped 0.8 percent to 21,380.99 as of the 4 p.m. close in Hong Kong. The gauge hit a six-month high yesterday after rising for the past seven weeks, the longest stretch of gains since October 2010, amid signs the U.S. economy is improving and bets China will ease monetary policy.
“We’re seeing a bit of profit-taking as investors are looking for the next catalysts,” said Angus Gluskie, who oversees about $350 million as managing director at White Funds Management in Sydney. “Investors are very skeptical about whether a recovery can proceed without another hurdle jumping up again. The austerity measures running through Europe are likely to take the edge off growth.”
Futures on the Standard & Poor’s 500 Index added 0.3 percent today. The index dropped 0.3 percent in New York yesterday as purchases of previously owned homes rose to a 4.57 million annual rate, less than forecast, a report from the National Association of Realtors showed.
Exporters declined as the U.S. home sales data and an unexpected decline in European services and manufacturing output added to signs the global economy is slowing.
Techtronic, which also makes Hoover vacuum cleaners, dipped 1.7 percent to HK$9.59. Foxconn International Holdings Ltd. (2038), a maker of mobile phones that count Nokia Oyj among its customers, fell 2.2 percent to HK$5.68.
The Hang Seng China Enterprises Index (HSCEI) of mainland companies listed in the city dropped 0.9 percent to 11,714.29, retreating from its highest close since Aug. 4.
Chinese Premier Wen Jiabao is expected to target growth of less than 8 percent for the world’s second-biggest economy in his report to the National People’s Congress on March 5, according to 8 of 15 economists surveyed by Bloomberg News. The government had an 8 percent goal from 2005 to 2011.
Mainland property developers retreated after the Shanghai government said it will maintain home-buying restrictions in the city, denying a report by the Shanghai Securities News that it relaxed some restrictions.
Country Garden, a Guangdong-based real estate company, sank 4.1 percent to HK$3.53. Soho Capital Ltd., a homebuilder in Beijing and Shanghai, fell 0.5 percent to HK$5.65. Sino-Ocean Land Holdings Ltd. (3377), a mainland developer, lost 1.1 percent to HK$4.66.
Signs of Overheating
The Hang Seng Index climbed 17 percent this year through yesterday, with shares in the gauge trading at 11 times estimated earnings. That compares with 13 times for the Standard & Poor’s 500 Index and 11 times for the Stoxx Europe 600 Index.
The rally drove the Hong Kong benchmark index’s 14-day relative strength index, a measure of momentum, to about 73 yesterday, exceeding the threshold of 70 that indicates to some traders it’s overbought.
HSBC Holdings Plc (HSBA) fell 1.5 percent to HK$70.15 after Europe’s biggest lender said it is closing down six branches in Japan as it withdraws from consumer banking operations in the country four years after starting the business.
Lonking Holdings Ltd. (3339) slumped 12 percent to HK$3 after the maker of construction equipment said earnings probably fell in 2011 due to rising operating costs and falling profit margins. Daiwa Securities Group Inc. maintained its “underperform” rating on the stock, saying this year’s outlook remains “mediocre.”
Among stocks that advanced, Esprit surged 25 percent to HK$17.78 even after saying first-half net income tumbled 74 percent to HK$555 million ($72 million). Operating margins reached 4.7 percent, above the company’s full-year target of between 1 percent and 2 percent.
Futures on the Hang Seng Index expiring this month lost 0.5 percent to 21,387. The HSI Volatility Index (VHSI) rose 2.7 percent to 22.89, indicating options traders expect a swing of 6.6 percent in the benchmark index over the next 30 days.
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