Bloomberg News

Hong Kong Stocks Post Biggest Weekly Drop in 4 Months on China

March 23, 2012

Hong Kong stocks fell, with the Hang Seng Index posting its biggest weekly drop in four months, as an unexpected profit decline at Agricultural Bank of China Ltd. (601288) renewed concern growth may slow in the world’s second- largest economy.

Agricultural Bank, China’s third-largest lender, slid 3.1 percent after saying quarterly profit dropped for the first time since listing two years ago. Esprit Holdings Ltd. (330), a Hong Kong- based clothier that depends on Europe for about 80 percent of sales, fell 2.3 percent, on worse-than-expected manufacturing data. Henderson Land Development Co. led property companies lower, dropping 3.2 percent.

“The market is skeptical about bank stocks globally and for the Chinese bank stocks, you see what happened with” Agricultural Bank, Jim Antos, a Hong Kong-based financial analyst at Mizuho Securities Co., said on Bloomberg Television. “Everybody got it wrong. You couldn’t have predicted it and that’s the kind of thing that shakes investor confidence,” he said.

The Hang Seng Index closed 1.1 percent lower at 20,668.80 in Hong Kong and for the week was down 3 percent, its biggest such drop since November. The Hang Seng China Enterprises Index (HSCEI) of mainland companies listed in the city slid 1 percent to 10,658.07.

Below Estimates

Agricultural Bank said its quarterly profit dropped because of lending restrictions and higher bad-loan costs. Net income declined 14 percent to 21.2 billion yuan ($3.4 billion) for the fourth quarter, from 24.7 billion yuan, according to data compiled by Bloomberg based on full-year figures reported by the Beijing-based lender yesterday. That fell short of the 28.84 billion-yuan average estimate of 20 analysts in a Bloomberg survey. The stock slid 3.1 percent to HK$3.41.

In Europe, a euro-area composite index based on a survey of purchasing managers in both industries dropped to 48.7 from 49.3 in February, London-based Markit Economics said in an initial estimate yesterday. Economists forecast a gain to 49.6. A reading below 50 indicates contraction. That added to pessimism about the global economic outlook after an earlier index showed China manufacturing is also shrinking.

Esprit fell 2.3 percent to HK$16.44. AAC Technologies Holdings Inc., a supplier of speakers and microphones for Apple, slid 2.9 percent to HK$22.15. HSBC Holdings Plc (5), Europe’s largest lender by market value, dropped 1.3 percent to HK$69.10.

China Developers

The cities of Guangzhou and Shenzhen may follow Chongqing and Shanghai in starting property tax trials, the Economic Information Daily reported today, citing Jia Kang, head of the Finance Ministry’s research institute for fiscal science, and Wang Haibin, an analyst at Shenzhen World Union Properties Consultancy Co. Property tax trials should be widened to target existing home owners, the report said.

Developers in Hong Kong and China fell. Hong Kong-based Henderson Land dropped 3.2 percent to HK$44.00. Mainland developer Agile Property Holdings Ltd. (3383) slid 0.2 percent to HK$8.78 and while rival Guangzhou R&F Properties Company Ltd. fell 0.8 percent to HK$9.06.

Futures on the Hang Seng Index (HSI) expiring this month declined 1.2 percent to 20,634. The HSI Volatility Index (VHSI) gained 2.5 percent to 21.02, indicating options traders expect a swing of about 6 percent in the benchmark index over the next 30 days.

To contact the reporter on this story: Eleni Himaras in Hong Kong at ehimaras@bloomberg.net

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


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