Hong Kong Stocks Fall on China Manufacturing, PetroChina

Hong Kong stocks fell for the first time in five days on re-opening from a holiday after gauges of China factory activity fell. PetroChina Co. led gains on the Hang Seng Index after the government announced it will raise natural-gas prices.

China Construction Bank Corp., the country’s second-biggest lender, dropped 3.8 percent. China Resources Land Ltd. slid 5 percent to lead declines among mainland developers amid reports mall operators are waiving rent to stave off vacancies. Li & Fung Ltd., a supplier of toys and clothes to Wal-Mart Stores Inc., gained 3.6 percent after a report showed stronger U.S. manufacturing.

The benchmark Hang Seng Index slipped 0.7 percent to 20,658.65 at the close. About three stocks dropped for each that rose, with volume 20 percent above the 30-day average. The Hang Seng China Enterprises Index of mainland companies lost 1.2 percent to 9,203.85.

“People are still in holiday mode, and the market has consolidated after the rebound in the last couple of days,” said Benjamin Tam, a Hong Kong-based fund manager who helps oversees about $1.5 billion at IG Investment, but that’s just some profit-taking.’’

Shares fell after mainland manufacturing slowed. The official Purchasing Managers’ Index dropped to 50.1 in June, the lowest in four months, from 50.8 in May, the National Bureau of Statistics and China Federation of Logistics & Purchasing said yesterday in Beijing. A private PMI from HSBC Holdings Plc and Markit Economics was 48.2, the weakest since September. Readings above 50 signal expansion.

China Construction Bank slid 3.8 percent to HK$5.28. Industrial & Commercial Bank of China Ltd., the world’s largest lender, dropped 2.9 percent to HK$4.75.

Slowing Growth

Weaker factory activity and a cash squeeze in the banking system add to odds Li Keqiang will become the first Chinese premier to miss an annual growth target since the Asian financial crisis in 1998. In the latest signal policy makers will tolerate slower expansion, President Xi Jinping said officials shouldn’t be judged solely on boosting growth.

A forecast for China’s second-quarter annualized economic growth was cut to 7.6 percent from the previous estimate of 7.7 percent at Bank of America Corp., Ting Lu, an economist for the lender, wrote in note today to clients previewing June data.

The Hang Seng China Enterprises Index, also known as the H-share index, has fallen more than 20 percent from its Feb. 1 high, meeting some investors’ definition of a bear market. The measure, which last week capped it worst first half since 2008, today traded at 6.8 times estimated earnings as of June 28, down from a five-year average of 10.77.

Mall Vacancies

A measure of developers had the second-biggest drop among the Hang Seng Index’s industry groups after financials. Property shares dropped as mainland malls are forgoing rent and offering other incentives to blunt the impact of a boom in shopping-center construction that threatens to push up vacancies.

China Resources Land fell 5 percent to HK$20.15. Agile Property Holdings Ltd., based in the city of Guangzhou, dropped 7 percent to HK$7.74. Shimao Property Holdings Ltd., a mainland developer controlled by billionaire Hui Wing Mau, lost 3.3 percent to HK$14.90.

Property stocks slid even as new home prices jumped in June by the most since they reversed declines in December, defying the government’s tightened property curbs. Prices surged 7.4 percent last month from a year earlier, SouFun Holdings Ltd., operator of the nation’s biggest real-estate website, said after a survey of 100 cities.

PetroChina Jumps

PetroChina, the country’s biggest natural-gas producer, surged 6.7 percent to HK$8.80, its steepest gain since May 2009. Beijing announced it will raise prices of the fuel for non-residential customers, the National Development & Reform Commission said on its website June 28. The stock also gained after being recommended by Morgan Stanley and BNP Paribas SA.

BYD Co., the Chinese auto company partly owned by Warren Buffett’s Berkshire Hathaway Inc., jumped 11 percent to HK$28.50. The southern Chinese city of Shenzhen, where BYD is based, is considering encouraging taxi operators to replace their 15,000 vehicles with electric cars, a city official said in a phone interview today.

Futures on the Standard & Poor’s 500 Index added 0.1 percent after the gauge climbed 0.5 percent in New York yesterday. The Institute for Supply Management’s manufacturing index increased to 50.9 in June from 49 a month earlier, the group said yesterday. The data beat the 50.5 forecast of 85 economists surveyed by Bloomberg, with a reading above 50 showing expansion.

Li & Fung rose 3.6 percent to HK$11.04. Techtronic Industries Co., a maker of power tools that gets 73 percent of its sales from North America, increased 2.3 percent to HK$18.98.

Metals Surge

Mining companies gained after metals prices surged on the U.S. factory data. Zijin Mining Group Co., China’s largest gold producer by market value, jumped 6.6 percent to HK$1.46 as gold continued its rebound from a 34-month low. Zhaojin Mining Industry Co. rose 2.2 percent to HK$5.10.

Hang Seng Index futures retreated 0.5 percent to 20,632. The HSI Volatility Index rose 6 percent to 21.37, indicating traders expect a swing of 6.1 percent for the equity benchmark in the next 30 days.

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