Bloomberg News

Hong Kong Stocks Reverse Gains on European Debt Concerns

May 17, 2012

Hong Kong stocks fell, with the benchmark index reversing earlier gains, as concern that Europe’s debt crisis was deepening offset optimism that the U.S. Federal Reserve stood ready to add stimulus if needed.

HSBC Holdings Plc, Europe’s largest bank, declined 1 percent. Li & Fung Ltd. (494), a supplier of toys and clothes to Wal- Mart Stores Inc. that gets 60 percent of sales in the U.S., advanced 1.8 percent. Tianneng Power International Ltd. (819) led gains among battery makers as China said it will subsidize the use of energy-saving household appliances, products and energy- efficient vehicles.

The Hang Seng Index (VHSI) fell 0.3 percent to 19,200.93 at the close of trading in Hong Kong, after earlier rising as much as 0.6 percent. The gauge yesterday entered a co-called correction after falling more than 10 percent from its Feb. 29 high for the year. Three stocks fell for every one that advanced amid volume that was 7.2 percent above the 30-day intraday average, according to data compiled by Bloomberg.

“Equities generally will underperform as long as there is no clarity on the fiscal or monetary input” in Europe, said Viktor Shvets, the head of thematic equity research at Credit Suisse Group AG in Hong Kong. “Until we inject more liquidity we’ll continue to stall.” He spoke in a Bloomberg Television interview today.

The Hang Seng Index (HSI) has fallen 11 percent from Feb. 29 amid signs China’s economic growth was slowing and as political turmoil in Europe renewed concern the debt crisis will worsen.

The decline trimmed this year’s gain for Hong Kong’s equity benchmark index to 4.2 percent. Shares on the index traded at 9.9 times estimated earnings, compared with a multiple of 12.6 on the Standard & Poor’s 500 Index and 10.1 times for the Stoxx Europe 600 Index. (SXXP)

China Shares

The Hang Seng China Enterprises Index of mainland stocks lost 0.4 percent to 9,700.87. The measure fell 12 percent this month through yesterday, wiping out its gain for the year.

Futures on the S&P 500 added 0.3 percent today. The index slipped 0.4 percent in New York yesterday, capping four days of losses, the longest decline in a month.

Companies that do business in Europe slipped as Greece heads toward national elections six weeks after the last vote, with its international bailout at stake. The European Central Bank said it will temporarily stop lending to some Greek banks to limit its risk as President Mario Draghi signaled the ECB won’t compromise on key principles to keep Greece in the euro.

HSBC declined 1 percent to HK$65.80. Esprit Holdings Ltd. (330), the clothing retailer that gets 80 percent of sales from Europe, lost 1.5 percent to HK$13.10, taking its retreat this week to 13 percent.

Fed Comments

U.S. economic data bolstered optimism that the world’s largest economy can withstand fallout from Europe. Several Federal Reserve policy makers said a loss of momentum in growth or increased risks to their economic outlook could warrant additional action to keep the recovery going, minutes of their last meeting showed.

Li & Fung gained 1.8 percent to HK$14.44. Techtronic Industries Co. (669), a power-tools maker that makes 72 percent of sales in North America, rose 2.3 percent to HK$8.82. Semiconductor Manufacturing International Corp., which makes 60 percent of revenue in North America, gained 1.5 percent to 33.5 Hong Kong cents.

Battery makers gained as China said it will allocate 26.5 billion yuan ($4.2 billion) in subsidies to boost the use of energy-saving household appliances and products, according to a statement posted on the government website yesterday citing a State Council meeting presided by Premier Wen Jiabao. Tianneng Power International surged 4.5 percent to HK$3.96 and Chaowei Power Holdings Ltd. rose 2.7 percent to HK$3.39.

Futures on the Hang Seng Index expiring this month slid 0.8 percent to 19,005. The HSI Volatility Index rose 0.2 percent to 27.79, indicating traders expect a swing of about 8 percent in the benchmark index during the next 30 days.

To contact the reporter on this story: Adam Haigh in Sydney at ahaigh1@bloomberg.net

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


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