Hong Kong Stocks Retreat, Paring Hang Seng Index’s Weekly Gain
Hong Kong stocks dropped after recording their biggest single-day gain since January yesterday, paring a third weekly advance for the city’s equity benchmark. Declines were limited amid investor optimism the U.S. will maintain its monetary stimulus.
Daphne International Holdings Ltd. (210), the footwear maker that sells Aldo and Aerosoles shoes in China, slumped 13 percent after saying it expects first-half profit to fall. Belle International Holdings Ltd. (1880), the nation’s largest footwear retailer, gained 4.8 percent after its same-store sales growth beat analyst estimates. CSR Corp., the country’s biggest trainmaker, gained 5.7 percent after Shanghai Securities News reported the nation may start taking bids for bullet trains in the second half.
The Hang Seng Index dropped 0.2 percent to 21,393.76 as of 10:02 a.m. in Hong Kong, with about the same number of companies falling and rising. The index is headed for a 2.6 percent increase for the week, its third straight gain. The Hang Seng China Enterprises Index dropped 0.3 percent to 9,518.90 after yesterday notching its biggest single-day advance since January.
“Investors are still focused on potential downside risk of the Chinese economy to see whether there will be any changes to the macro-economic policy in favor of growth stimulus,” said Ben Kwong, chief operating officer at brokerage KGI Asia Ltd. “After a strong rebound yesterday investors tend to be a bit cautious.”
The Hang Seng Index posted its biggest monthly decline in a year in June, slumping 7.1 percent as China’s money-market rates surged to a record and after Fed Chairman Ben S. Bernanke said policy makers may start dialing down stimulus if the U.S. economy shows sustained improvement.
The Hang Seng China Enterprises Index, also known as the H-share index, fell as much as 27 percent from a Feb. 1 high through June 27, meeting some investors’ definition of a bear market. The measure traded at 1.15 times the value of net assets yesterday, compared with its five-year average of 1.79.
Shares rallied yesterday on speculation China will take steps to boost growth and after Bernanke said the U.S. needs to maintain stimulus for the foreseeable future.
China’s statistics bureau is scheduled to release second-quarter economic data on July 15. Growth may have slowed to 7.5 percent from 7.7 percent in the first three months, according to the median estimate of economists in a Bloomberg survey. June figures on industrial output, fixed-asset investment and retail sales will be released on that day as well.
China’s trade unexpectedly declined in June in a sign weakness in global and domestic demand will intensify the nation’s economic slowdown. Exports fell 3.1 percent from a year earlier, the government said this week, compared with an estimated 3.7 percent gain in a Bloomberg survey. It’s the biggest decline since a 14 percent slump in October 2009.
Shares on the benchmark Hang Seng Index (HSI) traded at 10.2 times estimated earnings yesterday, compared with 15.2 times for the Standard & Poor’s 500 Index and 13.2 for the Stoxx Europe 600 Index, according to data compiled by Bloomberg.
Resources and energy companies lead declines this year on the Hang Seng Composite Index, the city’s broadest equity measure. The gauge fell 6.1 percent since the end of December, with information technology, utilities and services the only sectors to gain among 11 industry groups.
Futures on the S&P 500 slipped 0.1 percent after rising 1.4 percent yesterday in New York.
Hang Seng Index futures were little changed at 21,405. The HSI Volatility Index retreated 3 percent to 20.29, indicating traders expect a swing of 5.8 percent for the equity benchmark in the next 30 days.
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