Hong Kong Stocks Reverse Gains as China Developers DropJonathan Burgos
Hong Kong stocks fell, with the benchmark index sliding to a two-week low, as Chinese developers declined and investors weighed earnings.
Country Garden Holdings Co. slumped 5 percent, its biggest decline since April, after the mainland homebuilder announced plans to sell shares at a discount. China Cinda Asset Management Co., one of the nation’s four largest bad-loan managers, tumbled 7.1 percent after first-half profit lagged expectations. China Telecom Corp. surged 5.7 percent after the stock was raised to overweight at JPMorgan Chase & Co.
“The Hong Kong market has had a strong rally and it’s due for a period of consolidation,” Desmond Chua, a strategist at CMC Markets in Singapore, said by phone. “Country Garden’s rights issue at a steep discount is definitely a concern. We’re not yet close to the bottom of the Chinese housing market. We’ll probably get some government stimulus if it worsens.”
The Hang Seng Index slipped 0.7 percent to 24,741 at the close, erasing a 0.6 percent advance. The gauge erased this month’s advance, heading for a 0.1 percent slide. The Hang Seng China Enterprises Index of mainland stocks traded in the city, also known as the H-share gauge, sank 1.3 percent to 10,931.60.
The H-share index traded at 7.6 times estimated earnings today, compared with 11.4 for the Hang Seng Index and 16.8 on the Standard & Poor’s 500 Index yesterday. Investors are weighing whether the rally in Hong Kong shares will continue after China credit growth plunged and housing prices fell in most cities tracked last month, adding pressure to boost stimulus. Data today showed China’s industrial profits rose 13.5 percent in July from a year earlier after climbing 17.9 percent the month before.
Country Garden Holdings slumped 5 percent to HK$3.44 after announcing it was seeking HK$3.18 billion ($410 million) in a 15-for-1 rights issue, offering the shares at a 31 percent discount from the last closing price.
China’s largest developers risk missing their full-year sales targets as tighter credit and an economic slowdown cut demand for real estate. The nation’s 13 biggest homebuilders that provided full-year sales targets achieved 49 percent of those goals by the end of July, the weakest level in at least two years, according to data compiled by Bloomberg.
China Vanke Co., the nation’s biggest developer, slipped 3.3 percent to HK$14.28. China Resources Land Ltd. dropped 2.7 percent to HK$17.84. China Overseas Land & Investment Ltd. decreased 3.1 percent to HK$21.80.
China Cinda slumped 7.1 percent to HK$3.92. The Beijing-based company yesterday reported net income of 5.3 billion yuan ($863 million), less than the 5.7 billion yuan average of three estimates compiled by Bloomberg. The stock also fell as stake sales by rival China Huarong Asset Management Co. focused attention on the nation’s bad-debt managers, with the nation’s nonperforming loans climbing for almost three years.
China Mengniu Dairy Co. tumbled 6.7 percent to HK$35.45, the biggest decline since December 2011, on concerns that an increase in marketing expenses amid intensifying competition will put pressure on profit margins.
Among shares that advanced, China Telecom jumped 5.7 percent to HK$4.66, the highest since October 2012. JPMorgan raised its rating to overweight from neutral and increased its share-price forecast to HK$5.10 from HK$3.60. China Unicom (Hong Kong) Ltd. added 1.5 percent to HK$13.34.
Futures on the S&P 500 lost 0.2 percent today. The U.S. equity benchmark yesterday closed steady at 2,000.12, with the rally losing momentum as the gauge trades at 18 times reported earnings, the highest since 2010.
U.S. exchange-traded funds that buy Chinese and Hong Kong stocks had the biggest net inflows in the five days ended Aug. 26 even as money entering emerging markets slowed, according to data compiled by Bloomberg. China and Hong Kong funds climbed $776.8 million, compared with $617.4 million the week before.