Hong Kong stocks fell, with the Hang Seng Index declining for the first time in three days, as the cost of insuring against a Spanish default climbed to a record and U.S. consumer confidence dropped, dimming the earnings outlook for Asia’s exporters.
Esprit Holdings Ltd. (330), a clothing retailer that gets almost 80 percent of its revenue in Europe, slid 1.6 percent. Cnooc Ltd. (883), China’s biggest offshore oil producer by market value, fell 1 percent after crude prices declined. Industrial & Commercial Bank of China Ltd. lost 0.8 percent after Goldman Sachs Group Inc. was said to sell a $2.5 billion stake in the lender at a discount.
“Investors are now conscious about the threats to a smooth global economic recovery,” said Yoshihisa Okamoto, who helps oversee about $33 billion at Mizuho Asset Management Co. “The risk that the U.S. economy may not be as healthy as we thought and reignited concern about European debt issues” are dragging markets lower.
The Hang Seng Index (HSI) fell 0.4 percent to 20,610.64 at the close in Hong Kong, with 29 stocks falling on the 48-member gauge. The Hang Seng China Enterprises Index (HSCEI) of mainland companies slipped 0.8 percent to 10,844.74.
Hong Kong shares fell even after the People’s Bank of China increased the flexibility of its exchange rate against the dollar for the first time since 2007, a move that Baochuan Capital Management LLC said suggests a further liberalization of the economy. The yuan’s trading band was doubled to 1 percent, effective today.
Hong Kong’s benchmark index gained 12 percent this year through April 13 as the U.S. economy showed signs of strength and on speculation China would lower lending curbs. Shares on the Hang Seng traded at 10.4 times estimated earnings, compared with 13.1 times for the Standard & Poor’s 500 Index (SPXL1) and 10.5 times for the Stoxx Europe 600 Index.
The “U.S. and China economies are in limbo,” said Koji Toda, chief fund manager at Resona Bank Ltd. in Tokyo, which oversees the equivalent of $68 billion. “They’re not weak enough to expect easing measures, yet they’re not strong enough to lead global growth. When Europe’s debt issue creeps up in such an environment, that takes over investor sentiment.”
Futures on the Standard & Poor’s 500 Index slid 0.1 percent today. The gauge fell 1.3 percent in New York on April 13 as confidence among U.S. consumers cooled in April from a one-year high.
In Europe, five-year credit-default swaps on Spain surged to a record as Prime Minister Mariano Rajoy struggles to prevent the nation from becoming the fourth euro-region member to need a bailout.
Commodity Stocks Decline
Esprit Holdings fell 1.6 percent to HK$16.14. HSBC Holdings Plc, Europe’s biggest lender by market value, lost 1.4 percent to HK$66.95.
Commodity-related stocks declined after oil and metal prices dropped on concern Europe’s crisis is worsening. Cnooc slid 1 percent to HK$15.66. Aluminum Corp. of China Ltd., the nation’s largest producer of the metal, fell 0.8 percent to HK$3.76.
Crude oil for May delivery fell 0.8 percent to $102.83 a barrel in New York on April 13, the lowest close since April 11. The London Metal Exchange Index of prices for six industrial commodities including copper and aluminum sank 2.4 percent.
Industrial & Commercial Bank of China fell 0.8 percent to HK$5.17 in Hong Kong after two people with knowledge of the matter said Goldman Sachs will sell shares in the world’s biggest bank by market value at HK$5.05 each. Temasek Holdings Pte said today it will buy 3.55 billion ICBC shares. Global banks have divested $24 billion in Chinese lenders’ shares since 2009 to meet regulatory requirements to safeguard against risk.
China Southern Airlines Co. retreated 2.8 percent to HK$3.48, and China Eastern Airlines Corp. (670) fell 4.9 percent to HK$2.32. The nation’s two biggest carriers said in separate statements profit probably declined more than 50 percent in the first quarter because of smaller foreign-exchange gains, higher fuel prices and slower economic growth.
Futures on the Hang Seng Index expiring this month fell 0.7 percent to 20,578. The HSI Volatility Index (VHSI) jumped 6.1 percent to 21.38, indicating options traders expect a swing of about 6.1 percent in the benchmark index over the next 30 days.
-- With assistance from Kana Nishizawa in Hong Kong. Editors: Jason Clenfield, Jim Powell.
To contact the reporters on this story: Norie Kuboyama in Tokyo at firstname.lastname@example.org; Kana Nishizawa in Hong Kong at email@example.com.
To contact the editor responsible for this story: Nick Gentle at firstname.lastname@example.org