Hong Kong Stocks Drop After China Data; Solar Shares Fall

Hong Kong stocks fell, with the benchmark index halting a four-day advance, after China’s inflation rose more than expected while producer prices declined. Solar companies slid on a report of European tariffs.

Anhui Conch Cement Co., China’s biggest maker of the material, slid 2.1 percent after the nation’s statistics bureau said producer prices dropped 2.6 percent in April, a sign demand is weakening. GCL-Poly Energy Holdings Ltd., the world’s largest producer of polysilicon, fell 2.5 percent after a report the European Union plans to impose import duties on solar panels from China. Hengan International Group Co., a maker of tissue, sanitary napkins and diapers, jumped 5 percent after Bank of America Merrill Lynch recommended the shares.

The Hang Seng Index fell 0.1 percent to 23,211.48 at the close. About twice as many stocks declined as gained on the 50-member gauge, with trading volume 11 percent less than the 30-day intraday average. The Hang Seng China Enterprises Index of mainland companies declined 0.2 percent to 11,266.89.

“Inflation for everyday use is happening while factory and industrial prices are declining,” said Jackson Wong, vice president of Hong Kong-based brokerage Tanrich Securities Co. “That gives us a bad picture of the health of the Chinese economy. At current levels, the Hong Kong market is overbought so we are seeing some profit-taking across the board.”

The Hang Seng Index climbed 7.9 percent from this year’s low on April 18 as data from the U.S. signaled an improving economy. The equity measure traded at 10.6 times estimated earnings yesterday compared with 14.8 for the Standard & Poor’s 500 Index, according to data compiled by Bloomberg. Even with the Hang Seng rallying, the measure is still trading below its five-year average of 12.8.

China Prices

China’s consumer inflation was subdued in April while factory-gate price declines deepened. The consumer price index rose 2.4 percent in April, the National Bureau of Statistics said today in Beijing, compared with a median forecast of 2.3 percent inflation in a Bloomberg News survey. The producer price index fell 2.6 percent, steepening its 1.9 percent decline in March.

Anhui Conch dropped 2.1 percent to HK$28.50, while China Resources Enterprise Ltd., the government-backed partner of SABMiller Plc., slid 4.4 percent to HK$25.80.

Solar stocks slid. GCL-Poly Energy dropped 2.5 percent to HK$1.57. Hanergy Solar Group Ltd., a Beijing-based renewable-energy producer, sank 1.9 percent to 52 Hong Kong cents.

Solar Tariffs

The EU plans to impose tariffs as high as 67.9 percent on solar panels from China to counter unfair pricing, according to a commerce official from the bloc. The European Commission expects to introduce the levies by June 6 to punish Chinese solar manufacturers for selling panels in the 27-nation EU below cost, a practice known as dumping, the official said yesterday on condition of anonymity.

Hengan International jumped 5 percent to HK$84.55, the biggest gain on the Hang Seng Index, after Bank of America Merrill Lynch raised its rating on the stock to buy from neutral on improving outlook for the company’s products.

Futures on the Hang Seng Index gained 0.3 percent to 23,119. The HSI Volatility Index dropped 2.9 percent to 14.66, indicating traders expect a swing of 4.2 percent for the equity benchmark in the next 30 days.

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