Bloomberg News

Hong Kong Stocks Fall on Moody’s Euro Review, Before Bond Sales

December 12, 2011

Dec. 12 (Bloomberg) -- Hong Kong stocks fell as Italy and France prepared to sell debt and Moody’s Investors Service reiterated plans to review the credit ratings of European nations, overshadowing a debt accord reached last week.

Prada SpA, a Milan-based luxury-goods maker that gets more than 40 percent of its sales in Europe, sank 5.4 percent in Hong Kong. Country Garden Holdings Co., a Guangdong-based real estate developer, retreated 1.1 percent after a report that new home sales in Shanghai fell. Haitong Securities Co., China’s No. 3 brokerage by market value, canceled plans for an initial public offering, according to people with knowledge of the matter.

The Hang Seng Index slid 0.1 percent to 18,575.66 at the close, after rising as much as 1.8 percent. The volume of stocks traded was 41 percent lower than the average over the past 10 sessions, according to Bloomberg data. The Hang Seng China Enterprises Index of mainland companies listed in Hong Kong slid 0.1 percent to 10,059.35.

“People are very cautious and trading is very light so you can’t be too excited,” said Alex Wong, an asset-management director at Ample Capital Ltd. in Hong Kong. “In this thin market, people are not willing to do anything.”

The Hang Seng Index last week slid 2.4 percent amid concern growth is slowing in countries including China, Australia and Japan, and after Standard & Poor’s said it may cut credit ratings on Germany, France and 13 other members of the euro. Shares on the index traded at 10.1 times forecast earnings at the last close, compared with 12.7 times for the S&P 500 Index.

Prada Drops

Prada sank 5.4 percent to HK$33.90. Esprit Holdings Ltd., a clothier that gets most of its revenue from Europe, retreated 1.7 percent to HK$10.58 after rising as much as 2.2 percent. Hutchison Whampoa Ltd., a ports and telecom operator that makes 53 percent of its sales in Europe, lost 0.5 percent to HK$65.70

Hong Kong stocks slipped in late trading as the Euro Stoxx 50 Index, a benchmark for the euro region, declined before Italy and France sell a combined 13.5 billion euros ($18 billion) of short-term debt today. A European Union summit on the region’s debt crisis last week offered few new measures and doesn’t diminish the risk of credit-ranking revisions, Moody’s said.

Property Stocks Decline

A measure of property and construction companies was the biggest drag on the Hang Seng Composite Index among its 11 industry groups. Country Garden declined 1.1 percent to HK$2.84. China Overseas Land & Investment Ltd., a state developer, fell 0.9 percent to HK$13.62. Shimao Property Holdings Ltd., which earns all of its revenue on the mainland, slid 0.5 percent to HK$6.50.

Property consulting company Shanghai Uwin Real Estate Information Services said Shanghai’s new home sales slumped 56 percent in the first 11 days of December from a year earlier.

Renhe Commercial Holdings Co., a Chinese developer of underground shopping centers, sank 8.5 percent to 86 Hong Kong cents, extending its 9.6 percent decline on Dec. 9 after UBS AG cut its rating on the stock to “sell” from “buy,” citing overdue receivables.

Haitong Halts IPO

Haitong Securities Co., China’s third-biggest brokerage by market value, canceled plans for a $1.7 billion initial public offering in Hong Kong with shares to begin trading on Dec. 15, said three people with knowledge of the matter. Its shares fell 0.6 percent in Shanghai. Volatile markets curbed demand for the Shanghai-based company’s stock, said one of the people, who declined to be identified because the process is private.

The HSI Volatility Index has risen 78 percent this year through Dec. 9. It sank 7.1 percent to 29.97 today, indicating options traders expect a swing of 8.6 percent in the benchmark over the next 30 days. Futures on the Hang Seng Index fell 0.3 percent to 18,490.

Among stocks that gained were exporters to the U.S. Yue Yuen Industrial Holdings Ltd., which supplies Nike Inc. shoes to the U.S., rose 2.4 percent to HK$23.45. Techtronic Industries Co., a maker of power tools that gets more than 70 percent of its revenue from North America, gained 2.2 percent to HK$7.43.

U.S. Confidence Rises

Hong Kong stocks rose in early trading after consumer confidence rose in the U.S., the world’s biggest economy. The Thomson Reuters/University of Michigan preliminary index of consumer sentiment rose to a six-month high of 67.7 in December from 64.1 in November, beating estimates.

Futures on the Standard & Poor’s 500 Index slid 0.5 percent today. The gauge rose 1.7 percent in New York on Dec. 9 after European leaders in Brussels tightened anti-deficit rules and agreed to boost their rescue fund by as much as 200 billion euros ($267 billion) by funneling money to the International Monetary Fund.

The leaders also outlined a “fiscal compact” to prevent future debt run-ups and accelerated the start of a planned 500 billion-euro rescue fund.

“The European situation will continue to bother us into next year as policy initiatives seem insufficient,” said Mark Matthews, Singapore-based head of research for Asia at Bank Julius Baer & Co., which has about $180 billion globally. “U.S. economic data is improving quite nicely and that’s one of the few bright spots in the world.”

--With assistance from Yoshiaki Nohara in Tokyo. Editors: Jim Powell, Nick Gentle

To contact the reporter on this story: 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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