Bloomberg News

Hong Kong Stocks Fall as Wen Says China Will Keep Property Curbs

October 31, 2011

Oct. 31 (Bloomberg) -- Hong Kong stocks dropped, with the Hang Seng Index paring its biggest monthly advance in two years, as Chinese banks and developers fell after the government said it would not ease policies to cool the property market.

Industrial & Commercial Bank of China Ltd. slumped 1.6 percent after Premier Wen Jiabao said China will “firmly” maintain restrictions on the real-estate market. China Resources Land Ltd., a state developer, slid 5.4 percent. China Railway Group Ltd., the nation’s top builder of rail lines, sank 14 percent after earnings fell.

The Hang Seng Index fell 0.8 percent to 19,864.87 at the close in Hong Kong, with more than six stocks dropping for each that gained. The Hang Seng China Enterprises Index of mainland companies listed in Hong Kong slipped 1.1 percent to 10,512.99, its first drop since Oct. 20.

“There’s some profit-taking pressure today after last week’s strong rally,” said Kenny Tang, general manager at Hong Kong-based AMTD Financial Planning Ltd. “Chinese property shares are under selling pressure because Premier Wen reconfirmed the mainland government is going to cool down the property market.”

The Hang Seng Index surged 13 percent this month, the biggest gain since May 2009. Stocks rose 11 percent last week amid signs European leaders are making progress on the debt crisis and as China signaled policies to boost economic growth.

Wen Firm

Banks and property developers declined after Wen said China will “firmly” maintain property curbs. He said authorities should continue to strictly implement the central government’s real-estate policies in the coming months to let citizens see the results of the curbs, according to a statement on Oct. 29 after a State Council meeting.

Industrial & Commercial Bank of China sank 1.6 percent to HK$4.94. Agricultural Bank of China Ltd., the nation’s third- largest lender by market value, slipped 1.4 percent to HK$3.55.

Developers with operations in mainland China also declined after Goldman Sachs Group Inc. analyst Wang Yi said on Oct. 28 that property prices in China’s major cities may retreat 15 percent to 20 percent during the next 12 months. Inventories may rise to a 17-month high in the first half of next year with the government maintaining property curbs for the next three to six months, he said before Wen’s comments were reported.

China Resources Land sank 5.4 percent to HK$11.54. China Overseas Land & Investment Ltd., a developer controlled by the nation’s construction ministry, tumbled 5.7 percent to HK$14.66.

China Railway Group led rail-related stocks lower in Hong Kong today after the builder said third-quarter profit fell 49 percent to 1.14 billion yuan ($179 million) amid a 15-fold jump in borrowing costs. China Railway plunged 14 percent to HK$2.63. CSR Corp., China’s biggest trainmaker, tumbled 10 percent to HK$4.70.

--Editor: Nick Gentle, Jim Powell.

To contact the reporters on this story: Norie Kuboyama in Tokyo at nkuboyama@bloomberg.net; Kana Nishizawa in Hong Kong at knishizawa5@bloomberg.net

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


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