Hong Kong Stocks Cap Biggest Weekly Decline Since June

Hong Kong stocks fell, with the city’s benchmark index capping its biggest weekly slump in two months, as utilities and financial shares declined.

China Resources Power Holdings Ltd. sank 3.3 percent, retreating from a one-week high. China Merchants Bank Co. slid 1.1 percent after saying it plans to raise 34.8 billion yuan ($5.7 billion) in the world’s second-biggest share sale this year. Henderson Land Development Co. rose 2.6 percent after the homebuilder controlled by billionaire Lee Shau-kee posted higher sales.

The Hang Seng Index dropped 0.2 percent to 21,863.51 as of the close, after rising 1 percent earlier. The equity benchmark posted a 2.9 percent decline this week, the most since June 21, after outflows from emerging markets accelerated as the Federal Reserve signaled in the minutes of its July meeting that there was broad support to taper stimulus.

“This market correction will run for longer than we think as we transition from a liquidity-driven rally to a fundamental-support rally,” said Nader Naeimi, Sydney-based head of dynamic asset allocation at AMP Capital Investors Ltd., which manages more than $130 billion. “That transition usually brings uncertainty.”

The Hang Seng China Enterprises Index, also known as the H-share index, dropped 0.4 percent to 9,932.35 today, after rising as much as 1.3 percent. The gauge fell 19 percent from a Feb. 1 high through today and traded at 1.2 times book value, compared with a five-year average multiple of 1.8.

Liquidity Crunch

Chinese lenders erased earlier gains as China’s benchmark money-market rate headed for its biggest weekly gain in a month on concern cash supply will tighten as banks cover month-end obligations.

“There’s speculation the drop could be due to tight liquidity concerns,” said Mao Sheng, an analyst for Huaxi Securities Co. in Chengdu. “We had been worried there will be a repeat of the credit crunch, similar to the one we had in June.”

The Hang Seng Index retreated 3.5 percent this year, the worst performer among developed markets tracked by Bloomberg, on concern China’s growth is slowing. The gauge traded at 10.4 times estimated earnings today, compared with 14.9 for the Standard & Poor’s 500 Index as of yesterday.

Futures on the S&P 500 were little changed. The gauge gained 0.9 percent yesterday in New York as U.S. jobless claims fell to a five-year low over the past month and factory output in China and Europe expanded more than estimated.

The number of jobless claims in the month ended Aug. 17 declined to 330,500 a week on average, the least since November 2007, according to a Labor Department report yesterday. The Fed will begin to curtail bond buying next month, according to 65 percent of economists surveyed by Bloomberg from Aug. 9-13.

Biggest Decline

Utilities posted the biggest decline among the four industry groups on the Hang Seng Index. China Resources Power sank 3.3 percent to HK$17.80. Huaneng Power International Inc. dropped 2.2 percent to HK$7.54.

China Merchants Bank, the nation’s sixth-largest lender, fell 1.1 percent to HK$14.02. The lender said yesterday it plans to offer 3.75 billion Shanghai and Hong Kong-traded shares at 9.29 yuan or HK$11.68 each. That represents a 15 percent discount to yesterday’s closing price in Shanghai, or an 18 percent discount to the Hong Kong shares.

Chinese lenders also dropped as the seven-day repurchase rate rose even after the People’s Bank of China added a net 72 billion yuan ($11.8 billion) to the financial system this week.

Industrial & Commercial Bank of China Ltd., the nation’s biggest lender, slipped 0.4 percent to HK$5.14, erasing gains of as much as 1.9 percent. China Construction Bank Corp. lost 0.9 percent to HK$5.79 after rising 1.4 percent.

China Everbright Sinks

China Everbright Ltd. declined 4.1 percent to HK$10.20 after unit Everbright Securities Co. slumped to a two-month low in Shanghai. Chairman Yuan Changqing replaced Xu Haoming as president as the brokerage seeks to allay investor concerns after it made 23.4 billion yuan ($3.8 billion) of erroneous buy orders on Aug. 16.

Among stocks that advanced, Henderson Land climbed 2.6 percent to HK$47.40. Revenue from home sales in Hong Kong and mainland China rose 16 percent to HK$4.97 billion ($641 million) in the first half, while rental income from offices and malls gained 12 percent to HK$2.46 billion, the developer said yesterday.

The HSI Volatility Index declined 1.8 percent to 18.48, indicating traders expect the equity benchmark to swing 5.3 percent in the next 30 days.

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