Hong Kong Stocks Drop as G-8 Fails to Stem Europe Concern
Hong Kong’s (HSI) Hang Seng Index fell for a fourth day as speculation China may do more to support growth failed to lift the benchmark equity index ahead of a meeting of European leaders to discuss the region’s debt crisis this week.
HSBC Holdings Plc (5), Europe’s biggest bank, fell 1 percent in Hong Kong, capping its biggest four-day retreat since November. Esprit Holdings Ltd., the retailer that gets 79 percent of sales in Europe, retreated 2.1 percent. China Overseas Land & Investment Ltd. (688) paced gains by property developers after Premier Wen Jiabao said China will focus more on bolstering economic growth.
The Hang Seng Index declined 0.2 percent to 18,922.32 at the close of trading as three stocks rose for every two that fell. The Hang Seng China Enterprises Index (HSCEI) of mainland stocks climbed 0.1 percent to 9,582.46.
“In the case of a Greek exit from the euro zone, we think there would be a rapid, sentiment-driven sell-off on the fear of contagion,” said Michael Kurtz, head of global equity strategy at Nomura Holdings Inc., Japan’s largest brokerage. “This would likely bring about a large policy response to circle the wagons around the other periphery countries. With such a negative scenario apparently already priced, the bias is increasingly for the actual outcome over the next four to six weeks to surprise positively.”
Hong Kong’s benchmark index retreated 2.8 percent this year through May 18. Shares on the index trade at 9.6 times estimated earnings on average as of May 18, compared with a multiple of 12.3 on the Standard & Poor’s 500 Index, and 10 times for the Stoxx Europe 600 Index.
G-8 leaders on May 19 urged Greece to stay within the euro area as polls in the country showed a close race between parties supporting and opposing the bailout deal. The country is scheduled to hold another election on June 17 after talks to form a new government failed. European Union leaders will meet for a summit meeting on the crisis in Brussels on May 23.
HSBC Holdings fell 1 percent to HK$63.10. Esprit retreated 2.1 percent to HK$12.30.
Chinese developers climbed after Premier Wen’s comments on supporting growth fueled speculation that monetary policy will be further eased.
China Overseas Land & Investment Ltd. rose 1.8 percent to HK$15.06. China Resources Land Ltd. (1109), a state-owned developer, added 1.1 percent to HK$13.06.
Cnooc dropped 0.4 percent to HK$14.28 after China Securities Journal reported gasoline and diesel prices may drop by more than 300 yuan ($47.40) per ton, citing JYD Online Co., a commodity e-commerce platform. China Oilfield Services Ltd., an offshore energy explorer, lost 2.1 percent to HK$10.18.
Futures on the S&P 500 added 0.9 percent today. The index declined 0.7 percent in New York on May 18, completing a third week of declines.
Futures on the Hang Seng Index expiring this month were little changed on 18,809. The HSI Volatility Index lost 2.1 percent to 28.88, indicating that traders expect a swing of 8.3 percent in the next 30 days.
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