Hong Kong Stocks Decline Most in a Week on Fed ConcernsKana Nishizawa
Hong Kong stocks fell, with the benchmark index posting its biggest drop in a week, on expectations the Federal Reserve will scale back stimulus as soon as September.
Yue Yuen Industrial Holdings Ltd., which makes shoes for Nike Inc., dropped 3.8 percent. Developers slid after home sales in the city fell, with the Hang Seng property gauge posting its longest losing streak since February. GCL-Poly Energy Holdings Ltd., the world’s No. 1 maker of polysilicon used in solar panels, jumped 6.1 percent after the European Union imposed smaller-than-expected tariffs on panels from China.
The Hang Seng Index fell 1 percent to 22,069.24 at the close, with all but seven shares declining on the 50-member gauge. Trading volume was 6.2 percent less than the 30-day average. The Hang Seng China Enterprises Index of mainland companies slid 0.6 percent to 10,473.18 even after a private report showed China’s services industry expanded last month.
“The market has been weak on concern about interest-rate increases globally and talk from the Fed on potential removal of quantitative easing,” said Tim Leung, a portfolio manager who helps oversee about $1.7 billion at IG Investment Ltd. in Hong Kong. “Markets are still on relatively good valuation support for China as well as Hong Kong.”
The Hang Seng Index fell 2.6 percent this year through today, the only major developed market to decline, as brokerages cut China’s growth forecasts and amid concern the Fed may reduce stimulus. The equity gauge traded at 10.6 times estimated earnings yesterday, compared with 14.8 on the Standard & Poor’s 500 Index and 13.2 for Europe’s Stoxx 600, according to data compiled by Bloomberg.
The benchmark Hang Seng Index fell as much as 1.6 percent this afternoon as Japan’s Topix index deepened its correction after Shinzo Abe’s speech on the country’s growth strategy disappointed investors.
“Most of the reason behind the selling is the Japanese market after extending their losses in afternoon trade,” said Kenny Tang, general manager of AMTD Financial Planning Ltd. in Hong Kong. “That’s affecting sentiment.”
Futures on the S&P 500 slid 0.2 percent today. The gauge dropped 0.6 percent yesterday as economists predicted the U.S. central bank may curtail stimulus as soon as September amid signs of growth. A report from ADP Research Institute today is expected to show U.S. employers accelerated hiring in May.
Kansas City Fed President Esther George yesterday urged a reduction in bond buying as growth quickens. The central bank is buying $85 billion of Treasury and mortgage bonds each month to put downward pressure on borrowing costs.
Yue Yuen slid 3.8 percent to HK$21.40. Man Wah Holdings Ltd., a sofa maker that gets half its sales from the U.S., slipped 0.7 percent to HK$8.98. Techtronic Industries Co., a maker of power tools that gets about 73 percent of sales from North America, sank 4.9 percent to HK$19.88.
A measure of property developers sank for a sixth day, leading declines among the Hang Seng Index’s industry groups. Sun Hung Kai Properties Ltd., Hong Kong’s biggest builder, fell 1.3 percent to HK$100.20. Cheung Kong (Holdings) Ltd., the second-biggest builder in Hong Kong, declined 2.8 percent to HK$105.80. Henderson Land Development Co., controlled by billionaire Lee Shau-kee, dropped 2.2 percent to HK$48.
The number of home transactions in Hong Kong fell 49 percent in May, a third straight month of decline after the city’s government this year imposed its toughest yet measures to curb prices that have doubled since 2009. The value of the transactions fell to HK$24 billion ($3.1 billion) from HK$47.4 billion in May 2012.
AIA Group Ltd., the third-largest Asia-based insurer by market value, slid 3.4 percent to HK$33.20. Large insurers in China are facing a threat as banks establish their own insurance divisions, China Business News reported yesterday, citing AIA China Chief Executive Officer Cai Qiang.
Solar stocks advanced. GCL-Poly climbed 6.1 percent to HK$1.92. Solargiga Energy Holdings Ltd., a maker of silicon wafers, gained 2.6 percent to 39 Hong Kong cents.
The European Commission announced provisional anti-dumping duties of 11.8 percent yesterday on photovoltaic products from more than 100 Chinese manufacturers, an initial rate that may increase more than fivefold in August.
“The timing of the decision was well-known, and the actual tariff imposed was much lighter than anticipated by the market,” Cristobal Garcia, a Hong Kong-based analyst at Sanford C. Bernstein & Co., wrote in an e-mailed note today.
Sihuan Pharmaceutical Holdings Group Ltd., a maker of cardiocerebral vascular drugs, jumped 6.6 percent to HK$5.01. Deutsche Bank AG raised the company’s target price by 25 percent to HK$6, maintaining its buy rating.
Futures on the Hang Seng Index declined 0.8 percent to 21,826. The HSI Volatility Index climbed 6 percent to 17.74, indicating traders expect a swing of 5.1 percent for the equity benchmark in the next 30 days.