Hong Kong Stocks Fall on Property Shares; Belle ClimbsJonathan Burgos
Hong Kong stocks dropped, after the gauge posted two straight weekly advances, as developers plunged on reports some Chinese banks curbed lending to the sector and related industries.
China Resources Land Ltd. and China Overseas Land & Investment Ltd. tumbled at least 3.6 percent. Anhui Conch Cement Co., the biggest mainland producer of the building material by market value, fell 4.9 percent. Belle International Holdings Ltd. jumped 5.9 percent after the retailer of women’s footwear posted full-year profit that beat estimates and said its seeking possible cooperation with Tencent Holdings Ltd., Asia’s biggest Internet company, to boost its online presence.
The Hang Seng Index slid 0.8 percent to 22,388.56 at the close in Hong Kong, with seven shares dropping for each that rose on the gauge. The Hang Seng China Enterprises Index fell 1.4 percent to 9,797.86. Industrial Bank Co. and other unidentified banks tightened lending to the property sector and industries such as steel and cement, the Shanghai Securities News reported, without saying where it got the information.
“The outlook doesn’t look rosy for developers,” Andrew Sullivan, a Hong Kong-based director at Kim Eng Securities, said by phone. “There are reports some developers are starting to cut prices as they’re under pressure to find financing for their projects. Investors are turning cautious ahead of the results reporting season.”
Hong Kong’s benchmark gauge has fallen 3.9 percent this year, the second-worst performer among 24 developed markets tracked by Bloomberg. The H-share gauge dropped 9.4 percent for the period and traded at 6.5 times estimated earnings, compared with its five-year average of 10. More than 100 companies traded in Hong Kong are scheduled to post earnings this week.
Industrial Bank issued a notice before the Lunar New Year to suspend mezzanine financing and supply-chain financing in the real estate sector until the end of March, according to the Shanghai Securities News report, which cited an image of the notice circulated online.
Brokerages including Guotai Junan Securities Co., Haitong Securities Co. and Shenyin & Wanguo Securities Co. separately held internal meetings yesterday to discuss speculation that some banks suspended lending to developers, the 21st Century Business Herald reported yesterday, without citing anyone.
Reports of a halt in lending are “partly true,” analysts led by Qiu Guanhua at Guotai Junan wrote in a report. The suspension will last to the end of next month, they wrote.
China Resources Land slumped 5.7 percent to HK$17.40. China Overseas Land, the biggest mainland real estate company traded in Hong Kong, slipped 3.6 percent to HK$20.25. Country Garden Holdings Co., controlled by billionaire Yang Huiyan, dropped 8.3 percent to HK$3.87.
Cement producers slid. Anhui Conch fell 4.9 percent to HK$28.45. China National Building Material Co. declined 3 percent to HK$7.43.
Some Chinese developers may default on their debt as property trust loans worth about 350 billion yuan ($57 billion) mature this year, according to Jefferies Hong Kong Ltd.
“We are concerned tight liquidity and restrictive shadow banking may limit refinancing flexibility and thus potentially trigger loan defaults,” Venant Chiang, an analyst at Jefferies, wrote in a note last week. “As financial risk is on the rise, we expect continued liquidity concerns to weigh on the sector.”
New home price growth in China’s first-tier cities slowed in January after local governments implemented property measures to rein in escalating values and banks tightened lending. Prices in the southern business hubs of Guangzhou and Shenzhen rose 19 percent and 18 percent, respectively, from a year earlier, the National Bureau of Statistics said in a statement today. That was the slowest pace since July.
People’s Bank of China Governor Zhou Xiaochuan said the country’s expansion prospects of 7 to 8 percent growth are suitable for the nation and can boost the global economy. Finance Minister Lou Jiwei said possible defaults in Chinese wealth-management products don’t reflect a “big problem,” and weakness in the yuan is within the normal range.
Newocean Energy Holdings Ltd. decreased 14 percent to HK$7.24, the biggest decline since April 2009. Allegations made by Chinese-language magazine Capital Week aren’t true, Newocean Managing Director Lawrence Shum said by phone. The company is seeking legal advice, he said.
Among stocks that rose, Belle International jumped 5.9 percent to HK$9.32 after reporting yesterday that full-year net income increased 3.2 percent to 4.49 billion yuan from a year earlier. The company has approached Tencent and other e-commerce operators for possible collaboration as it seeks to expand its online platform amid rising competition, Chief Executive Officer Sheng Baijiao said at a briefing today in Hong Kong.