Bloomberg News

Hong Kong Stocks Fall on Italy Concern; China Developers Slide

November 07, 2011

Nov. 7 (Bloomberg) -- Hong Kong stocks fell amid concern about Europe’s debt crisis on signs Italian Prime Minister Silvio Berlusconi will fail to muster a majority for a key vote tomorrow. Losses were limited as Goldman Sachs Group Inc. recommended Chinese equities.

China Overseas Land & Investment Ltd., a state developer, fell 4.8 percent after Phoenix TV reported Premier Wen Jiabao signaling that property curbs won’t be relaxed until home prices drop. Cnooc Ltd., China’s leading offshore energy explorer, sank 2.2 percent after the collapse of a deal to buy Argentina’s biggest oil exporter.

“Equities will continue to be under the pall of very high volatility,” Andrew Freris, senior investment strategist for Asia at BNP Paribas Wealth Management, told Susan Li on Bloomberg Television’s “First Up.” Investors should be “out of equities and concentrate on fixed income.”

The Hang Seng Index slipped 0.8 percent to 19,677.89 at the close, after rising as much as 0.7 percent. The Hang Seng China Enterprises Index of mainland companies listed in Hong Kong retreated 0.6 percent to 10,646.75.

Italy’s parliament will vote tomorrow on the 2010 budget report amid an unraveling of Berlusconi’s majority and a surge in the nation’s borrowing costs. Greek Prime Minister George Papandreou agreed to step down as a new government is created to secure international financing to avert a collapse of the country’s economy. The MSCI Asia Pacific Index lost 0.5 percent, bringing its year-to-date decline to 13 percent.

U.S. Futures

Companies in the Hang Seng Index trade at nine times profit, according to data compiled by Bloomberg. The price-earnings multiple fell to 7.4 last month, the lowest level since October 2008.

Standard & Poor’s 500 Index futures expiring in December declined 1.3 percent to 1,235 today. The gauge retreated 2.5 percent last week.

China Overseas Land slid 4.8 percent to HK$14.28, the steepest drop on the Hang Seng index. Shimao Property Holdings Ltd., which earns all of its revenue from the mainland, retreated 4.1 percent to HK$7.50.

China won’t waver on property market curbs with the aim of bringing home prices to a reasonable level, Prime Minister Wen said in Russia, according to Phoenix TV.

Goldman Recommendation

“Wen’s comment on property prices dragged down real estate names and also brought concern that this may mean easing measures may be delayed,” said Wu Kan, a fund manager at Dazhong Insurance Co., which oversees $285 million.

Cnooc lost 2.2 percent to HK$14.92 after a deal to a buy BP Plc’s $7.1 billion stake in Argentine crude producer Pan American Energy LLC collapsed. The failure may make it difficult for Cnooc to reach output growth targets, said Gordon Kwan, Mirae Asset Securities Ltd.’s head of regional energy research in Hong Kong.

“We are recommending a long position in Chinese equities,” Goldman Sachs strategists said yesterday in a note to clients. “The market may be poised to continue to shift from the pricing in of hard-landing scenarios to the pricing in of some policy-driven relief and reacceleration.”

Great Wall Motor Co., China’s biggest maker of pickup trucks and sport-utility vehicles, jumped 5.7 percent to HK$12.68. The auto manufacturer invested 412 million yuan ($65 million) in Baoding Great Wall Internal Combustion Engine Manufacturing Co. and 1.06 billion yuan in Tianjin Boxin Autoparts Co., the company said in a Nov. 4 statement to the Shanghai exchange.

Tingyi (Cayman Islands) Holding Corp., China’s largest packaged-food maker, surged 9.4 percent to HK$22.75. The company said PepsiCo Inc. will swap its China bottling operations for a stake in Tingyi’s beverage business.

--With assistance from Kana Nishizawa in Hong Kong and Allen Wan in Shanghai. Editors: John McCluskey, Jason Clenfield, Jim Powell.

To contact the reporter on this story: Lynn Thomasson in Hong Kong at lthomasson@bloomberg.net

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


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