Bloomberg News

Hong Kong Stocks Fall on Greece Default Concern, Asia Outlook

February 07, 2012

Feb. 7 (Bloomberg) -- Hong Kong stocks fell for a second day, after the Hang Seng Index last week reached a six-month, as investors awaited the outcome of Greek bailout talks amid warnings Europe’s debt crisis threatens Asia’s economic growth.

Cosco Pacific Ltd., which operates ports in Greece, slid 1.8 percent. Shimao Property Holdings Ltd., a mainland developer, sank 6 percent after the International Monetary Fund yesterday said the nation’s growth rate could slow by as much as half if Europe’s crisis worsens. BYD Co., the Chinese automaker backed by Warren Buffett’s Berkshire Hathaway Inc., rose 4 percent after Phillip Securities (HK) Ltd. doubled its share-price forecast.

The Hang Seng Index dropped 0.1 percent to 20,699.19 at the close, with almost five stocks declining for every four that gained. The Hang Seng China Enterprises Index of mainland companies listed in Hong Kong slid 0.6 percent to 11,499.77.

“Investors are limited in making any big moves,” said Ayako Sera, a market strategist in Tokyo at Sumitomo Trust & Banking Co., which manages about $298 billion. “They can’t put risk on the table or sell off shares as they are extremely cautious to see whether or not Greece can avoid a default.”

The Hang Seng Index last week posted its longest weekly winning streak since October 2010 as positive U.S. economic reports boosted optimism global demand will grow. Companies in the gauge traded at 10.5 times forecast earnings, down from 14.4 times at the beginning of 2011, according to data compiled by Bloomberg. The Standard & Poor’s 500 Index trades at 12.8 times.

Futures on the Standard & Poor’s 500 Index rose 0.2 percent today. The index slipped less than 0.1 percent yesterday in New York as European leaders stepped up pressure on Greek politicians to meet the conditions of a 130 billion-euro ($171 billion) bailout, saying time was running out.

Greek Prime Minister Lucas Papademos plans today to discuss with the nation’s political leaders the implementation of additional fiscal measures needed to secure a second European Union-led bailout. Greece still needs to detail 600 million euros of budget cuts for 2012, a government official said in Athens yesterday.

Cosco Pacific slipped 1.8 percent to HK$11.82. Li & Fung Ltd., the supplier of toys and clothes that gets about 24 percent of sales from Europe, fell 0.5 percent to HK$17.40.

China Pessimism

Chinese developers and lenders dropped after the IMF said China’s economic growth rate could be cut almost in half if Europe’s crisis gets worse. Based on its “downside” forecast for the global economy, China’s growth could slow by as much as 4 percentage points from the fund’s current projection, which is for 8.2 percent this year, the organization said in a report released yesterday.

Shimao retreated 6 percent to HK$8.21. Agile Property Holdings Ltd., the Chinese developer partly owned by JPMorgan Chase & Co., sank 4.7 percent to HK$8.78. China Construction Bank Corp., the nation’s second-largest lender, slid 0.9 percent to HK$6.32.

“The market is pessimistic about China’s growth,” said Wang Zheng, Shanghai-based chief investment officer at Jingxi Investment Management Co., which manages about $120 million. “The European debt issue threatens the country’s exports.”

Property sales in first-tier Chinese cities will probably fall this year to a level 20 percent to 25 percent below their peak in March-April last year, said Peter Choy, associate managing director for Asia Corporate Finance at Moody’s Investors Service.

Hang Seng Futures

Futures on the Hang Seng Index added 0.6 percent to 20,781. The HSI Volatility Index lost 0.9 percent to 22.73 today, indicating options traders expect a swing of 6.5 percent in the benchmark over the next 30 days.

Among stocks that advanced, BYD climbed 4 percent to HK$25.90. Phillip Securities raised its rating to “neutral” from “reduce” and increased its share-price forecast to HK$25.20 from HK$11.30.

Sales of the carmaker’s new S6 and G6 models have performed well and may foreshadow “new robust growth” for BYD, Zhang Jing, an analyst at Phillip Securities, wrote in a report dated yesterday.

--Editor: John McCluskey, Jason Clenfield.

To contact the reporters on this story: Kana Nishizawa in Hong Kong at knishizawa5@bloomberg.net; Jonathan Burgos in Singapore at jburgos4@bloomberg.net.

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


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