Bloomberg News

Hong Kong Stocks Fall Ahead of U.S. Jobs Data; Esprit Tumbles

September 02, 2011

Sept. 2 (Bloomberg) -- Hong Kong’s stocks fell for the first time in five days, paring this week’s gains, ahead of a report that may show U.S. employment growth has slowed, adding to concerns the world’s largest economy is deteriorating.

Li & Fung Ltd., a supplier of toys and clothes to Wal-Mart Stores Inc., slumped 6.7 percent. Cathay Pacific Airways Ltd., the Hong-Kong based international carrier, slid 1.8 percent. Esprit Holdings Ltd., a clothing retailer, tumbled 10 percent after cutting its profit outlook. Sino Land Co., a property developer, advanced 0.5 percent after reporting a jump in full- year profit.

“Expectations are relatively low for tonight’s jobs data,” said Tim Schroeders, who helps manage $1 billion in equities at Pengana Capital Ltd. in Melbourne. “The U.S. recovery remains anemic, with lingering concerns over job creation and house prices.”

The Hang Seng Index slipped 1.8 percent to 20,212.91 as of the 4 p.m. close of trading in Hong Kong. Just four stocks rose on the 46-member gauge. The measure advanced the past four days, sending the index to a weekly gain of 3.2 percent, its biggest increase since the week ended March 25.

The Hang Seng China Enterprises Index of Chinese companies listed in Hong Kong slid 2.4 percent to 10,664.45.

Futures on the Standard & Poor’s 500 Index fell 0.6 percent today. The index retreated 1.2 percent in New York yesterday as banks fell and investors speculated that the U.S. jobs report will show the economy continues to struggle.

U.S. Employment

Li & Fung slumped 6.7 percent to HK$13.84. The company’s investment rating was also lowered to “outperform” from “buy” at CLSA Asia-Pacific Markets. Cathay Pacific, which counts North America as its biggest market for sales, lost 1.8 percent to HK$15.74. Foxconn International Holdings Ltd., which receives 24 percent of its sales outside of China, lost 0.8 percent to HK$3.92.

Stocks fell before a Labor Department report today that may show U.S. non-farm payrolls climbed 68,000 after a 117,000 increase in July, according to the median forecast of economists surveyed by Bloomberg News. The unemployment rate probably held at 9.1 percent, marking 26 of the last 28 months in which it has been at or above 9 percent.

The Hang Seng Index rose for its second consecutive weekly advance. Shares on the index traded at 10.8 times forecast earnings, compared with 12 times for the Standard & Poor’s 500 Index.

Biggest Decline

Esprit, which receives most of its revenue from Europe, tumbled 10 percent to HK$19.64, the biggest decline on the Hang Seng index. The clothing retailer said net income for the fiscal year that ended June 30 will “record a significant decrease.” Today’s slide in Esprit’s share price extended this year’s drop to 47 percent, the biggest loss on the Hang Seng index in the last 12 months.

“This will likely impact fiscal year 2011’s dividend payout,” Vineet Sharma, a Hong Kong-based analyst at Barclays Capital, said in a note to clients today. Esprit’s statement “could reflect an inability to achieve timely closure for some loss-making stores,” said Sharma, who downgraded the stock to “equal weight” from “overweight.”

Commodity producers declined after the price of crude oil retreated as much as 0.6 percent, down from its highest level in almost a month, and the London Metal Exchange measure of six metals slid 1.3 percent yesterday.

Commodity Producers

PetroChina Co., Asia’s largest company by market value, declined 3.5 percent to HK$9.67. Cnooc Ltd., China’s No. 1 offshore oil explorer, fell 3.3 percent to HK$15.44, the biggest drag on the Hang Seng index. Jiangxi Copper Co., China’s No. 1 producer of the metal, dropped 3.9 percent to HK$21.95.

Among stocks that gained, Sino Land advanced 0.5 percent to HK$12.22, the second-biggest support on the Hang Seng index and the third-steepest rise. The shares earlier rose as much as 5.3 percent. The developer said full-year underlying profit rose 26 percent after it booked more profit from apartment sales.

Of the 323 companies on the Hang Seng Composite Index that announced semi-annual net income since July 11, 159 reported positive growth while 70 posted a negative surprise, according to data compiled by Bloomberg.

Futures on the Hang Seng Index slid 1.7 percent to 20,056. The HSI Volatility Index climbed 2.2 percent to 30.86, indicating options traders expect a swing of 8.8 percent in the Hang Seng Index in the next 30 days.

--With assistance from Michael Wei in Shanghai. Editors: John McCluskey, Drew Gibson.

To contact the reporters on this story: Anna Kitanaka in Tokyo at akitanaka@bloomberg.net; Shani Raja in Sydney at sraja4@bloomberg.net

To contact the editor responsible for this story: Nick Gentle at ngentle2@bloomberg.net


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