Hong Kong Stocks Drop Most Since November; Sinopec Slides

Hong Kong stocks fell, with the city’s benchmark index dropping the most since November, amid renewed concern about Europe’s debt crisis and as China Petroleum & Chemical Corp. tumbled on a share-sale plan. Declines accelerated in late trading as local developers sank.

Sinopec, as Asia’s biggest oil refiner by output is also known, fell 6.4 percent after saying it will raise HK$24 billion ($3.1 billion) in its biggest share sale since listing in 2000. HSBC Holdings Plc, Europe’s largest bank, slumped 2.7 percent. Sun Hung Kai Properties Ltd., Hong Kong’s biggest developer by market value, slid 3.2 percent on speculation the city government will take new measures to cool the housing market.

The Hang Seng Index dropped 2.3 percent to 23,148.53 at the close, its steepest decline since Nov. 8. All but 4 companies fell on the 50-member gauge, with trading volume 56 percent above the 30-day average, according to data compiled by Bloomberg. The Hang Seng China Enterprises Index of mainland companies slumped 2.8 percent to 11,813.39.

“Sinopec placement was negative news to trigger the morning sell-off, but in the afternoon there was heavy selling of local property shares,” said Steven Leung, a Hong Kong-based institutional sales director at UOB Kay Hian Ltd. “Lots of people are taking profits and worrying there will be measures from the Hong Kong government to cool down the local property market.”

Hong Kong’s market will be shut for three days next week for the Lunar New Year holidays, while markets in mainland China will be closed for the whole week. The Hang Seng Index rose for a fifth straight month in January, the longest such streak since July 2009, amid signs U.S. and China’s economies are recovering.

Relative Value

The gauge traded at 11.5 times average estimated earnings yesterday, compared with 13.5 for the Standard & Poor’s 500 Index and 12.1 for the Stoxx Europe 600 Index, according to data compiled by Bloomberg.

Futures on the Standard & Poor’s 500 Index rose 0.2 percent. The S&P 500 sank 1.2 percent yesterday, its biggest decline since November, as bond yields in Spain and Italy soared. Spanish Premier Mariano Rajoy faces calls to resign amid contested reports about illegal payments, and Italy’s Silvio Berlusconi narrowed the front-runner’s lead before elections this month.

Esprit Holdings Ltd., a clothier that gets more than three-quarter of its revenue from Europe, dropped 2.1 percent to HK$10.30. HSBC slid 2.7 percent to HK$85.45.

The Hang Seng Index has traded above its 50-day average since September and some of this year’s biggest gainers were among shares that fell the most today. Bank of China Ltd., which advanced 14 percent in 2013, dropped 3.8 percent to HK$3.79. Bank of Communications Co. fell 3.3 percent. Shares of the lender have increased 13 percent this year.

Sinopec Drops

Sinopec slumped 6.4 percent to HK$8.74, the biggest drop and drag on the Hang Seng Index. The company will sell 2.85 billion Hong Kong-traded shares at HK$8.45 each, 9.5 percent less than yesterday’s close, according to a filing after the market closed yesterday. The company plans to use the money for “general corporate purposes,” it said in the statement, without giving more details.

A measure of property developers had the biggest drop among the Hang Seng Index’s four industry groups. Sun Hung Kai slid 3.2 percent to HK$121.30. New World Development Co., which recorded the biggest gain in the Hang Seng Property Index in 2012, retreated 4 percent to HK$13.84.

Property Market

The Hong Kong Monetary Authority can roll out a sixth package of measures if necessary to rein in the property market after already using tools such as limits on mortgage terms, HKMA Chief Executive Norman Chan said yesterday. Overheating in the housing market is the biggest risk to financial stability, Chan said, echoing a warning in December from the International Monetary Fund.

Futures on the Hang Seng Index declined 2.3 percent to 23,085. The HSI Volatility Index surged 10 percent to 14.63, indicating traders expect a swing of 4.2 percent for the equity benchmark in the next 30 days.

Time Watch Investments, an assembler and seller of brand-name watches, rose 2.2 percent to HK$1.38 from its initial public offering price of HK$1.35.

Before it's here, it's on the Bloomberg Terminal.