Hong Kong Stocks Fall on China Economic Growth Concern
Hong Kong stocks dropped, with the benchmark index capping its longest weekly losing streak in a year, before reports on China’s inflation and manufacturing and amid concern the economy is slowing. Shares slid even after the nation’s first interest rate cut since 2008.
Chinese banks led declines after Nomura Holdings Inc. said new rules on lending and deposits will hurt banking profits. Anhui Conch Cement Co. fell 3.8 percent after saying first-half profit may drop by more than 50 percent. Real estate developer Wharf Holdings Ltd. (4) and Wheelock & Co. were suspended pending a transaction announcement. Chinese developers advanced amid speculation the rate cut will boost home sales.
The Hang Seng Index slid 0.9 percent to 18,502.34 at the close, with almost twice as many stocks declining as rising on the 49-member gauge. The index fell 0.3 percent for the week, its fifth straight week of declines and the longest losing streak since June 2011. The Hang Seng China Enterprises Index (HSCEI) of mainland stocks dropped 1.3 percent to 9,352.79.
“The glass is always either half empty or half full, and right now people are choosing to focus on the empty part,” said Pauline Dan, a Hong Kong- based chief investment officer at Samsung Asset Management Co., which manages $100 billion. “The fact that China’s coming out with a rate cut now leads people to think that upcoming data on the economy is going to be weak.”
Shares also fell today after Federal Reserve Chairman Ben S. Bernanke declined to specify options for further easing, damping expectations for monetary stimulus.
Hong Kong’s benchmark index tumbled 14 percent through yesterday from this year’s high on Feb. 29 amid deepening Europe’s debt crisis and signs of economic slowdown in the U.S. and China. Shares on the Hang Seng Index traded at 9.7 times estimated earnings on average yesterday, compared with 12.6 times for the Standard & Poor’s 500 Index and 10.1 times for the Stoxx Europe 600 Index.
Fixed-asset investment expanded at the slowest pace in a decade in May, inflation matched a two-year low and industrial output grew less than 10 percent for a second month, reports due tomorrow are expected to show, according to economist surveys by Bloomberg News.
Foxconn International Holdings Ltd., a mobile-phone maker plunged slid 2 percent to HK$3.02. China Yurun Food Group Ltd. (1068), a meat producer, dropped 1.4 percent to HK$7.87.
Anhui Conch slumped 3.8 percent to HK$21.75 after saying it expects net income for the six months ended June 30 to fall by more than 50 percent from a year earlier on slowing demand for cement and falling prices.
China yesterday cut borrowing costs for the first time since 2008 and loosened controls on bank lending and deposit rates, stepping up efforts to combat a deepening slowdown as Europe’s debt crisis threatens global growth.
Nomura said new banking rules will reduce 2012 profit at the country’s four largest lenders by about 4 percent. People’s Bank of China allowed banks to offer 20 percent discounts on borrowing costs, wider than the previous 10 percent, and said lenders may pay as much as 10 percent more than the benchmark interest rate on deposits, the first time a premium will be allowed.
Industrial & Commercial Bank of China (601398) Ltd., the nation’s biggest lender by market value, dropped 4.9 percent to HK$4.26 while China Construction Bank Corp. (939), the second-largest, slid 4 percent to HK$5.28.
Chinese developers rose on speculation demand will increase. Shimao Property Holdings Ltd. climbed 5 percent to HK$11.02, while Guangzhou R&F Properties Co. increased 4.4 percent to HK$10.38.
The moves by China’s central bank is positive for the property sector in the near term as investment and speculative demand for housing will further increase, Credit Suisse Group AG wrote in a report.
Wharf Holdings and its parent Wheelock & Co. were suspended today. Property developer Greentown China Holdings Ltd. (3900), also suspended, plans to sell a stake in the company to Wharf, the Wall Street Journal reported, citing an unidentified person.
Hang Seng Index (HSI) futures expiring this month slid 0.9 percent to 18,355. The HSI Volatility Index gained 5.5 percent to 28.44, indicating traders expect a swing of about 8.2 percent in the benchmark index during the next 30 days.
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