Hong Kong Stocks Decline Second Day Before U.S. Jobs Data

Hong Kong stocks fell for a second day as the benchmark index continued to retreat from a 2 1/2-year high ahead of U.S. jobs data this week that investors will use to gauge when the Federal Reserve will reduce stimulus.

Shanghai Electric Group Co. slumped 4.8 percent after surging yesterday by the most since October 2011. Footwear retailer Belle International Holdings Ltd. retreated 1.5 percent after Deutsche Bank AG said it will be removed from the FTSE China 25 index. China Mobile Ltd., the world’s largest phone company, climbed 0.9 percent after Netease reported it was granted a 4G license.

The Hang Seng Index retreated 0.8 percent to 23,728.70 at the close in Hong Kong, with more than eight shares declining for each that gained on the 50-member gauge. The Hang Seng China Enterprises Index, also known as the H-share index, dropped 0.7 percent to 11,368.78.

“After hitting new highs, Hong Kong stock market is looking for an excuse for a short-term correction,” said Ben Kwong, Hong Kong-based chief operating officer at brokerage KGI Asia Ltd. “Investors are shifting their focus to when Fed tapering will happen.”

The Hang Seng Index retreated yesterday from its highest level since April 2011 after data showed China’s non-manufacturing Purchasing Managers’ Index fell to 56 in November from 56.3 in October. A gauge on China’s services industry today from HSBC Holdings Plc and Markit Economics declined to 52.5 in November from 52.6 the previous month, with readings above 50 indicating growth.

U.S. Jobs

Futures on the Standard & Poor’s 500 Index climbed 0.2 percent today. The gauge dropped 0.3 percent yesterday as investors assessed falling car and retail sales before data this week that may offer clues on when the Fed will cut asset purchases. Economists surveyed by Bloomberg predict Dec. 6 data will show the unemployment rate matching a five-year low.

Chinese President Xi Jinping said the environment for economic development next year isn’t optimistic. His comments at a symposium on Nov. 22, reported by the Xinhua News Agency yesterday, may reflect efforts to tamp growth expectations in 2014. While industrial investment and retail sales are picking up, China faces factory overcapacity, excessive local government debt and slower exports.

China may set its 2014 gross domestic product growth target at 7 percent, down from 7.5 percent this year, the Economic Information Daily said yesterday, citing research groups. Premier Li Keqiang said in October that China needs annual growth of 7.2 percent to keep unemployment stable after indicating in July that 7 percent was the “bottom line” for expansion.

Nuclear Power

Shanghai Electric dropped 4.8 percent to HK$2.96, while Dongfang Electric Corp., which surged 11 percent yesterday, slid 2.6 percent to HK$14.32 today. The shares rallied yesterday after Xinhua News reported China is willing to invest or take stakes in nuclear power construction projects in the U.K., citing Premier Li Keqiang.

Belle slumped 1.5 percent to HK$9.28, China Coal Energy Co. retreated 1.2 percent to HK$5.11. The shares will be removed from the FTSE China 25 index after the market closes on Dec. 20, Deutsche Bank wrote.

Relative Value

The Hang Seng Index climbed 20 percent from its June low amid signs China’s economy is stabilizing. The measure traded at 11.32 times estimated earnings, compared with 16.2 for the S&P 500 yesterday. The H-share index climbed 28 percent from this year’s low on June 25 after policy makers unveiled the biggest reform package since the 1990s.

Stocks listed on the mainland climbed, with the Shanghai Composite Index jumping 1.3 percent. Companies linked to Shanghai’s free-trade zone rose on central bank plans to implement reform measures for the area within three months.

Among shares that rose, China Mobile rose 0.9 percent to HK$84.20. China’s Ministry of Industry and Information Technology granted TD-LTE 4G license to the company, Netease reported, without citing anyone.

Wing Hang Bank Ltd. jumped 3.8 percent to HK$117.90 after Reuters reported at least four bids for the family-owned local lender are expected this month.

China Yurun Food Group Ltd., which provides sausage, bacon and ham, surged 11 percent to HK$5.65, the biggest gain on the Hang Seng Composite Index. Hong Kong yesterday reported its first case of a form of bird flu, and concerns about the virus may prompt people to switch to beef or pork, according to Bloomberg Industries analyst Thomas Jastrzab.

Futures on the Hang Seng Index slid 0.7 percent to 23,731. The Hang Seng Volatility Index gained 2.8 percent to 15.99, indicating traders expect the benchmark equity index to swing 4.6 percent in the next 30 days.

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