Hong Kong Stocks Complete Longest Streak of Losses Since 2003
May 06, 2011, 5:26 AM EDTBy Kana Nishizawa and Anna Kitanaka
May 6 (Bloomberg) -- Hong Kong stocks fell for an eighth day, the longest stretch of losses since the 2003 spread of severe acute respiratory syndrome and the U.S. invasion of Iraq, as economic reports in America and falling commodity prices damped investor confidence in the global recovery.
Li & Fung Ltd., the biggest supplier to retailers including Wal-Mart Stores Inc., dropped 0.6 percent. HSBC Holdings Plc, which made 20 percent of its 2009 revenue in North America, lost 1.4 percent. Cnooc Ltd., China’s biggest offshore oil producer, retreated 2.3 percent, while Jiangxi Copper Co., China’s No. 1 producer of the metal, sank 2.2 percent.
“There’s been a decline in sentiment,” said Peter Elston, a strategist at Aberdeen Asset Management Plc, which oversees about $282 billion. “Fears of the U.S. economy grew yesterday. I haven’t been convinced by these recoveries in the developed world as I just see them being driven by stimulus and the major structural trend is one of deleveraging.”
The Hang Seng Index fell 0.4 percent to 23,159.14 at the close, its longest losing streak since April 2003. Four stocks fell for every three that rose in the 45-member index. The gauge declined 2.4 percent for the week. The Hang Seng China Enterprises Index of Chinese companies’ H-shares gained 0.3 percent to 12,848.82.
Li & Fung slid 0.6 percent to HK$36.55, while HSBC sank 1.4 percent to HK$82.70, the biggest drag on the Hang Seng Index.
Futures on the Standard & Poor’s 500 Index climbed 0.4 percent today. In New York, the index dropped for a fourth day, falling 0.9 percent yesterday.
U.S. Economy
Service industries in the U.S. expanded in April at the slowest pace in eight months as companies cut back in response to higher energy costs, according to the Institute for Supply Management’s index of U.S. non-manufacturing companies published on May 4.
Applications for jobless benefits unexpectedly jumped by 43,000 to 474,000 in the week ended April 30, the most since August, Labor Department figures showed yesterday.
Also, U.S. consumer confidence dropped last week to the lowest level in more than a month as rising fuel costs squeezed American household budgets. The Bloomberg Consumer Comfort Index decreased to minus 46.2 in the week ended May 1, the lowest level since the end of March, from minus 45.1 the prior period.
Commodity stocks fell after crude oil and metal prices declined on concern that economic growth will slow as central banks seek to cool inflation by raising borrowing costs.
Cnooc, PetroChina
“The U.S. and global recovery is a slow recovery, not a full swing recovery,” said Diane Lin, a fund manager at Pengana Capital, which oversees $1 billion in Sydney. “Commodities are overbought and over-owned. We’re seeing a correction on that. We don’t think it’s something that will give structural growth.”
Cnooc slid 2.3 percent to HK$17.98, while PetroChina Co., the country’s largest oil company, dropped 0.8 percent to HK$10.48. Jiangxi Copper fell 2.2 percent to HK$24.10.
Crude oil for June delivery plunged 8.6 percent to $99.80 a barrel yesterday, the lowest settlement in New York since March 16. The London Metal Exchange Index of six metals including copper and aluminum sank for a second day, falling 4 percent yesterday, the biggest drop since November 16.
‘Shakeout Was Due’
“There was so much money that was poured into commodities that we were due for a shakeout,” said Aberdeen’s Elston. “Economies in Asia are still essentially growing at decent rates, and if central banks aren’t doing enough to rein that in, then you won’t actually see real demand for commodities fall. Once people realize that, they’ll come back in.”
European Central Bank President Jean-Claude Trichet signaled yesterday the bank will wait until after June to raise interest rates again, wrong-footing some investors who had expected a quicker move to fight inflation.
Hong Kong stocks last sank for eight straight days in the period ended April 1, 2003, after U.S. forces began their attack on Iraq with cruise missiles in what commanders described as a plan to “decapitate” Saddam Hussein’s leadership before an all-out assault to disarm the nation.
The region’s markets also plunged in 2003 as a global outbreak of severe acute respiratory syndrome, or SARS, killed at least 774 worldwide, with China and Hong Kong accounting for more than 80 percent of deaths, according to the World Health Organization.
Airlines Climb
The Hang Seng advanced 1.1 percent this year through yesterday, as global economic data and corporate earnings eased concern that Japan’s nuclear crisis and tensions in the Middle East will derail growth. Shares in the gauge traded at an average 12.3 times forecast earnings yesterday, compared with 14.4 times at the end of last year, according to data compiled by Bloomberg.
While oil companies dropped on lower crude prices, airlines advanced on speculation fuel costs will drop. Cathay Pacific Airways Ltd. gained 3.2 percent to HK$19.90, the biggest increase in the Hang Seng Index. China Southern Airlines Co., Asia’s largest carrier by passenger numbers, surged 7.1 percent to HK$4.24, while rival China Eastern Airlines Corp., the nation’s No. 2 by people carried, increased 5.5 percent to HK$3.64.
Futures on the Hang Seng Index dropped 0.6 percent to 22,970. The HSI Volatility Index, the benchmark gauge for Hong Kong stock options, slid 1.2 percent to 17.09, indicating options traders expect a swing of 4.9 percent in the Hang Seng Index in the next 30 days.
--Editor: John McCluskey, Nick Gentle.
Contact the reporters on this story: Kana Nishizawa in Tokyo at knishizawa5@bloomberg.net; Anna Kitanaka in Tokyo at akitanaka@bloomberg.net.
To contact the editor responsible for this story: Nick Gentle at ngentle2@bloomberg.net.
