Hong Kong Stocks Decline After Biggest Rise in Seven Weeks

Hong Kong stocks dropped, after the Hang Seng Index yesterday posted the steepest rally in seven weeks, as a report showed Chinese inflation slowed more than economists expected and Great Wall Motor Co. slumped.

Great Wall plunged 8.5 percent after the truck maker forecast sales growth will slow. Belle International Holdings Ltd. declined 4.2 percent, paring yesterday’s 13 percent surge, after a HSBC Holdings Plc report said the rally showed “irrational exuberance” about China’s No. 1 seller of footwear. Sunac China Holdings Ltd. climbed 5 percent after the luxury-house builder said it expects to sell 28 percent more homes this year than in 2013 even as property curbs in major cities are tightened.

The Hang Seng Index declined 0.9 percent to 22,787.33 at the close, with almost four shares falling for each that rose. The gauge jumped 1.2 percent yesterday, the most since Nov. 18. The Hang Seng China Enterprises Index of mainland shares traded in the city, known as the H-share index, slid 1.7 percent to 10,152.82 after climbing yesterday for the first time in five days.

The inflation reading “may give the People’s Bank of China room to have a look at how it’s handling policy,” Evan Lucas, a Melbourne-based markets strategist at IG Ltd., said by phone. “It’s a soft inflation number and is definitely below where you’d have expected.”

China Inflation

China’s consumer prices increased 2.5 percent year-on-year in December, slowing from a 3 percent increase the previous month, data showed today. That compares with the 2.7 percent median estimate in a Bloomberg survey of economists. An index of producer prices fell 1.4 percent from a year earlier, the 22nd straight drop.

Federal Reserve minutes yesterday showed U.S. officials saw diminishing benefits from the central bank’s bond-buying program. Policy makers will gather Jan. 28-29 to consider the next step in their strategy of gradually reducing the pace of bond buying as the economy strengthens. The minutes didn’t describe a set schedule for reductions, although “a few” officials mentioned the need for a “more deterministic path.”

The Hang Seng Index traded at 10.1 times estimated earnings today, compared with 15.5 for the Standard & Poor’s 500 Index yesterday. Futures on the S&P 500 were little changed today after the gauge fell less than 0.1 percent in New York yesterday.

Great Wall declined 8.5 percent to HK$39.35. The carmaker said sales will increase 17 percent to 880,000 units this year after rising 21 percent in 2013.

Belle sank 4.2 percent to HK$9.53. HSBC analysts Chris Zee and Erwan Rambourg reiterated an underweight recommendation on the shares and cut their target price on the shares by 4.7 percent.

Sunac jumped 5 percent to HK$5.02, the highest close in more than a month. Sales at the home builder will be 65 billion yuan ($11 billion) this year, Chairman Sun Hongbin told reporters in Shanghai yesterday.

SPT Energy Group Inc. surged 8.3 percent to HK$4.94 as Jefferies Group LLC named the oil-services firm among its top picks.

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