Hong Kong Stocks Snap Five-Day Rally as Tencent Drops

Hong Kong stocks fell, snapping the equity benchmark’s longest winning streak since January, as Tencent Holdings Ltd. led technology shares lower.

Tencent, Asia’s largest Internet company, fell the most on the Hang Seng Index amid continuing concern the sector is overvalued. GCL-Poly Energy Holdings Ltd., the world’s biggest maker of polysilicon, slid 1.8 percent on speculation more companies in the solar industry may default. Hong Kong Exchanges & Clearing Ltd. jumped 2.9 percent after a proposal for mutual market access with Shanghai’s bourse was submitted for government approval, China Business News reported yesterday.

The Hang Seng Index fell 0.2 percent to 22,510.08 at the close, snapping a five-day rally. The measure rose 2 percent this week, its second weekly advance. The Hang Seng China Enterprises Index, also known as the H-share index, rose 0.2 percent to 10,110.01, the highest close since Jan. 22.

“The market has had a fantastic run,” Stuart Beavis, head of institutional equity derivatives at Vantage Capital Markets in Hong Kong, said by phone. “We’re going to run out of steam very quickly. I would look to go long volatility and long protection now.”

The Hang Seng Index is the second-worst performer among developed markets this year through yesterday, amid speculation China will miss its 7.5 percent growth goal as data signal a deepening economic slowdown. The gauge traded at 10.3 times estimated earnings today, compared with 16.1 times for the Standard & Poor’s 500 Index yesterday.

China Dependence

Emerging markets, increasingly dependent on China for their own growth, may suffer as the world’s second-largest economy decelerates, the International Monetary Fund said.

Futures on the S&P 500 Index gained 0.2 percent today. The U.S. equities benchmark index slipped 0.1 percent yesterday, retreating from a record high as investors sold technology and consumer shares. Jobless claims rose more than expected.

The government today is expected to report U.S. employers added 200,000 people to nonfarm payrolls last month, according to the median of 90 economist estimates compiled by Bloomberg, the most since a 274,000 increase in November and up from the 175,000 workers added in February.

Tencent dropped 3.9 percent to HK$525. The stock has lost 17 percent since March 6, after a 1,266 percent surge during the previous five years sent its price-to-earnings ratio to a six-year high.

‘Totally Loved’

“Tencent has been totally loved,” Vantage Capital’s Beavis said. “Stocks can’t go up forever. Investors are probably looking at what Tencent’s true valuation is.”

Lenovo Group Ltd. fell 1 percent to HK$8.91. The Chinese maker of personal computers must convince government officials that buying a server unit from International Business Machines Corp. won’t give China back-door access to U.S. secrets and infrastructure, according to people familiar with the matter and an analysis by Bloomberg Industries.

GCL-Poly Energy slipped 1.8 percent to HK$2.79. China’s clean-energy industry faces record debt payments this quarter, highlighting a battle for survival after Shanghai Chaori Solar Energy Science & Technology Co., a solar-panel maker, became the country’s first onshore-bond issuer to default last month.

“The worst isn’t over,” said Shi Lei, head of fixed-income research in Beijing at Ping An Securities Co., a unit of the nation’s second-biggest insurer. “Many solar or wind companies rely on foreign or domestic government subsidies. It’s possible that another company in the industry may default.”

Debt Loads

The China Banking Regulatory Commission released guidelines in March for better management of outstanding non-performing loans, Shanghai Securities News reported, citing unidentified people.

Among shares that rose, Hong Kong Exchanges climbed 2.9 percent to HK$130.50, the highest close since Dec. 27. A final version of a proposed mutual-access proposal between the Hong Kong and Shanghai bourses has been submitted for government approval, China Business News reported yesterday, citing an unidentified executive from a Chinese brokerage. The report didn’t give details on the approval process.

Cnooc Ltd. gained 1.7 percent to HK$12.02 after Xinhua News Agency reported China’s biggest offshore oil producer is seeking private capital for its gas-station business.

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