Hong Kong Stocks Decline, Retreating From 19-Month High

Hong Kong stocks declined, with the city’s benchmark index retreating for a third day from a 19-month high, led by Air China Ltd.

Air China, the world’s biggest carrier by market value, slid 6.1 percent. Li Ning Co. slumped 15 percent after the Chinese sportswear company said it plans to raise as much as HK$1.87 billion ($241 million) from a bond issue that allows holders to buy shares are a steep discount. China Rongsheng Heavy Industries Group Holdings Ltd. dropped 5.6 percent after the shipbuilder’s controlling shareholder sold shares.

The Hang Seng Index lost 0.1 percent to 23,580.43 as of the 4 p.m. close in Hong Kong, with about three shares falling for every two that rose. The gauge is heading for a fifth month of advance, the longest streak of such gains since July 2009, amid optimism China’s economy will continue to recover.

“The market has accumulated very strong gains in the past few months so now it’s due for consolidation,” said Ben Kwong, chief operating officer at KGI Asia Ltd. in Hong Kong. “Investors will probably buy shares on weakness. With the steady improvement in the economy, the earnings will also improve accordingly.”

Trading volumes on the city’s benchmark index, which dropped 0.1 percent this week, were 4.8 percent higher than the the 30 day average, according to data compiled by Bloomberg. The Hang Seng China Enterprises Index of mainland companies dropped 0.8 percent to 12,001.81 today.

China Minsheng Banking Corp. retreated 2.5 percent to HK$10.86 after yesterday closing at its highest level since it started trading in November 2009. The stock’s 14-day relative strength index, an indicator of momentum, has remained above 70, a level considered by some investors as a sign shares have risen too fast, for the sixth consecutive day.

Airlines Drop

Airlines dropped as jet fuel prices rose in the six days through yesterday stoking concern that higher fuel costs will weigh on earnings as carriers compete with an expanding high-speed rail network. Air China declined 6.1 percent to HK$6.66. China Eastern Airlines Corp., the nation’s third-largest carrier, fell 1.9 percent to HK$3.53.

“The average fuel price in 2013 might turn our higher,” Barclays Plc analyst Patrick Xu wrote in a note yesterday. “That would lead to lower-than-expected earnings for the airlines.” Barclays cut its rating for Air China to underweight from equal-weight.

Lenovo Group Ltd. fell 2.5 percent to HK$8.22 after Chief Financial Officer Wong Wai Ming said the company is assessing potential acquisition targets and strategic alliances, including a deal with Research In Motion, to bolster its mobile-device business.

‘Urgent Need’

Li Ning sank 15 percent to HK$5.30. The company is raising as much as HK$1.87 billion selling bonds that can be converted into shares at HK$3.50 each, 44 percent lower than the stock’s last closing price before the announcement, according to a statement.

“The steep discount the company is willing to offer reflects its urgent need for capital to support the transformation plan, and the recovery could be slower than expected,” Jerry Peng, a Shenzhen-based analyst at Guotai Junan Securities Co. Ltd. said by phone.

Haitian International Holdings Ltd. dropped 5.8 percent to HK$9.42. The supplier of plastic components used in automotive, healthcare and consumer electronics industries said major stakeholder Sky Treasure Capital Ltd. plans to sell 84.3 million shares at HK$9.20 each.

Great Eagle

China Rongsheng, the country’s largest shipbuilder outside state control, slipped 5.6 percent to HK$1.52. Former Chairman Zhang has reduced his interest to 29.32 percent from almost 48 percent in transactions with his father and Rongsheng’s new head, according to a company filing to the Hong Kong stock exchange yesterday. He remains the biggest shareholder, it said.

Among stocks that advanced, Great Eagle Holdings Ltd. jumped 14 percent to HK$31.70 after the owner of hotels and restaurants said it plans to spin off its properties in Hong Kong to a separate company to be listed on the city’s bourse.

The Hang Seng Volatility Index fell 13 percent this week to 12.28, indicating options traders expect a swing of 3.5 percent in the next 30 days. That’s the lowest since Aug. 10, 2005. Futures on the Hang Seng Index fell less than 0.1 percent to 23,597.

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