Hong Kong Stocks Retreat From Six-Year High on EarningsJonathan Burgos
Hong Kong stocks fell for the first time in three days as investors weighed earnings after the benchmark index yesterday advanced to a six-year high.
Guangzhou R&F Properties Co. tumbled 7.2 percent after cutting its full-year sales target and reporting a weaker first-half profit. Citic Pacific Ltd. sank 3 percent to lead losses on the Hang Seng Index after the steelmaker revised payment plans for acquiring assets from its state-owned parent. China Modern Dairy Holdings Ltd. climbed 4.6 percent after the milk producer’s first-half net income more than tripled.
The Hang Seng Index declined 0.4 percent to 25,074.50 at the close. The gauge ended yesterday at its highest since May 2008. The Hang Seng China Enterprises Index, also known as the H-share index, added 0.1 percent to 11,124.33.
“We’re seeing some consolidation as the market has gone up too fast,” Linus Yip, a strategist at First Shanghai Securities Ltd. in Hong Kong, said by phone. “The rally looks sustainable. Valuations in Hong Kong still look reasonable.”
The Hang Seng Index rose 18 percent from a March low after the government deployed measures to support growth. Recent China data from factory output to credit expansion missed expectations and housing prices fell, adding pressure for more stimulus. The Hang Seng Index traded at 11.6 times estimated earnings today, compared with 7.7 for the H-share gauge and 16.8 on the Standard & Poor’s 500 Index yesterday.
Hong Kong Exchanges & Clearing Ltd. yesterday issued draft amendments to its trading rules ahead of an equity link with Shanghai. The proposed changes are subject to approval by the city’s Securities and Futures Commission, according to the company’s website. Regulations on matters such as margin trading and short-selling have yet to be included.
A link connecting bourses in Hong Kong and Shenzhen has been submitted for approval, Caixin reported today on its official microblog, citing Xiao Zhijia, deputy director of development of the Shenzhen Municipal Government Financial Services Office.
Guangzhou R&F Properties tumbled 7.2 percent to HK$10.04, the biggest decline since June 2013. The developer cut its full-year home-sales target to 60 billion yuan ($9.8 billion) from 70 billion yuan after reporting first-half net income dropped 26 percent to 1.07 billion yuan from a year earlier.
Citic Pacific slipped 3 percent to HK$14.86. The company yesterday said it completed a HK$286.6 billion ($37 billion) purchase of banking and brokerage assets from Citic Group Corp., adjusting the payment to include less cash and more new shares.
Shares of companies that supply goods to U.S. retailers declined after after new-home sales in that country unexpectedly slid in July. Yue Yuen Industrial Holdings Ltd., which makes shoes for Nike Inc., fell 1.6 percent to HK$24.55. Li & Fung Ltd., the world’s biggest supplier of toys and clothes to retailers, fell 0.8 percent to HK$9.80.
Among shares that gained, China Modern Dairy climbed 4.6 percent to HK$3.63. First-half net income jumped to 523.2 million yuan from 153.6 million yuan a year earlier.
Futures on the S&P 500 were little changed today. The U.S. equity benchmark advanced 0.5 percent to a record close yesterday, after briefly trading above the 2,000 level, as corporate dealmaking and prospects for economic stimulus in Europe bolstered confidence in the bull market.
Data yesterday showed the pace of new-home sales in the U.S. fell to the slowest in four months in July. The real-estate market has advanced in fits and starts this year, buffeted by tight credit and slow wage growth. Federal Reserve Chair Janet Yellen signaled last week that while slack remains in the labor market, interest rates could be raised sooner than expected.
The presidents of Russia and Ukraine are set to meet in Minsk, Belarus today, amid Russian plans to send a second convoy of aid trucks after the first sparked accusations of an invasion.