Bloomberg News

Hong Kong Stocks Head for Biggest Monthly Drop in Three Years

September 28, 2011

Sept. 28 (Bloomberg) -- Hong Kong stocks dropped, dragging the Hang Seng Index toward its biggest monthly decline in almost three years, amid lingering concerns over the global economy and Europe’s debt crisis.

Industrial & Commercial Bank of China Ltd., the nation’s biggest lender by market value, sank 3.8 percent today after rallying as much as 9.9 percent yesterday. Hutchison Whampoa Ltd. declined after its mobile phone unit said an auction for signal spectrum in the U.K. faces delay. Active Group Holdings Ltd., a maker of men’s shoes, fell as much as 6.7 percent in its Hong Kong listing debut today before closing 0.8 percent lower. Suncorp Technologies Ltd. rallied 9.8 percent after scrapping a share sale.

“Stocks had a very strong rebound yesterday, but it seems that investors remain cautious about the European debt crisis,” said Ben Kwong, chief operating officer at KGI Asia Ltd. “Investors here are not fully convinced that the crisis is over, and that they believe the market could test another bottom because of prevailing concerns of the global economic slowdown and the debt crisis of developed economies.”

The Hang Seng Index lost 0.7 percent to 18,011.06 as of the close in Hong Kong, dragging the measure toward a 12 percent decline this month, its biggest monthly drop since Oct. 2008. The measure is on course for a 20 percent loss this quarter, its steepest decline since the period ended Dec. 2008. The index yesterday rose 4.2 percent for its largest gain since May 2009.

Close to Agreement

The Hang Seng China Enterprises Index of Chinese companies listed in Hong Kong slid 0.2 percent to 9,277.49.

Futures on the Standard & Poor’s 500 Index dropped 0.2 percent today after swinging between gains and losses more than 10 times. In New York, the index climbed 1.1 percent yesterday on optimism European leaders are close to an agreement to contain the region’s debt crisis. The S&P 500 has risen 4.1 percent in the past three trading sessions.

German Chancellor Angela Merkel said Greece is ready to fulfill the conditions laid down by a so-called troika assessing Greek progress at meeting the terms of its international rescue. Greek Prime Minister George Papandreou won parliamentary backing for a property tax to meet deficit-reduction targets required to avoid default.

Stocks trimmed their advance in the U.S. yesterday following a Financial Times report that some euro-area countries are demanding private creditors take bigger writedowns on their Greek bond holdings.

Absorb Bigger Losses

As many as seven of the 17 nations using the euro believe private creditors should absorb bigger losses on their Greek bond holdings, a division that may threaten an agreement reached with private investors in July, the Financial Times reported, citing unidentified senior European officials.

Industrial & Commercial Bank slid 3.8 percent to HK$4.04 after rallying yesterday by the most in 2 1/2 years. The stock was the biggest drag on the Hang Seng Index. Bank of China Ltd., which jumped 6 percent yesterday, fell 3 percent to HK$2.57.

The cost of protecting China’s sovereign debt from default jumped to the highest level since March 2009, according to data provider CMA. Credit-default swap contracts on China surged 16 basis to 170, according to CMA, which is owned by CME Group Inc. and compiles prices quoted by dealers in privately negotiated markets.

Three of the four industry groups on the Hang Seng Index declined, with about three shares falling for every two that gained. The Hang Seng Index has tumbled 22 percent this year on concern the global economy will enter a recession amid Europe’s debt crisis and slowing economic growth in the U.S. Shares on the index traded at 9.7 times forecast earnings, compared with 11.8 times for the Standard & Poor’s 500 Index.

Hutchison, Active Group

Hutchison Whampoa fell 3 percent to HK$60.10. The company’s Three unit’s consultation for a planned U.K. mobile-telephony spectrum auction faces further delay, and proposed plans for the auction may not be published until the end of this year or the beginning of 2012, David Dyson, the CEO of the U.K. unit, said at a briefing in London.

Active Group Holdings, which receives most of its revenue from China, dropped 0.8 percent to HK$1.19 today in its debut. The company said it expects net proceeds of HK$337.4 million from its initial public offering after setting the price of the shares at HK$1.20 each. That was the bottom end of the company’s previously announced range.

Among stocks that rose, Suncorp Technologies, which designs, makes and sells telephones, surged 9.8 percent to 22.5 Hong Kong cents. The company said it is scrapping a planned sale of stock to existing shareholders that aimed to raise HK$235.1 million ($30 million) because of market conditions.

Offshore Natural Gas

Cnooc Ltd., China’s biggest offshore oil producer by market value, rose 3.9 percent to HK$13.30 amid speculation the company may double its estimate for reserves at what may be China’s largest offshore natural gas deposit. Cnooc and Husky Energy Inc., a Canadian oil company controlled by billionaire Li Ka- Shing, are exploring for gas in the South China Sea.

Futures on the Hang Seng Index fell 0.6 percent to 17,956. The HSI Volatility Index rose 2.3 percent to 40.68, indicating options traders expect a swing of 11.7 percent in the Hang Seng Index in the next 30 days.

--Editors: John McCluskey, Nick Gentle

To contact the reporter on this story: Anna Kitanaka in Tokyo at akitanaka@bloomberg.net

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


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