Hong Kong stocks dropped, with the benchmark index headed for a sixth weekly loss in seven weeks, as commodities and energy producers dropped after U.S. home sales and manufacturing data missed estimates, fueling concern that global economic expansion is weakening.
Li & Fung Ltd. (494), a supplier of clothes and toys to Wal-Mart Stores Inc., dropped 4.2 percent. Cnooc Ltd., China’s biggest offshore energy explorer, lost 3.2 percent after crude oil fell below $80 a barrel. Anhui Conch Cement (914) Co., China’s biggest maker of the material, dropped 1.8 percent even after the country’s banking regulator was said to encourage funding for the sector to focus on growth.
The Hang Seng Index slipped 1 percent to 19,067.51 at midday trading break, extending yesterday’s 1.3 percent retreat. Four stocks dropped for each that rose on the 49-member gauge, which is headed for a 0.9 percent decline this week. The Hang Seng China Enterprises Index (HSCEI) of mainland stocks dropped 1.3 percent to 9,543.10.
“There will be further downside -- things are still getting worse,” said Peter Elston, Singapore-based head of Asia-Pacific strategy at Aberdeen Asset Management. The firm oversees about $270 billion. “You’re seeing a gradual weakening of the ability of governments to step in.”
Hong Kong’s benchmark index fell 11 percent from this year’s peak in February through yesterday amid concern economic growth is slowing in the U.S. and China as Europe’s debt crisis spreads. Companies on the Hang Seng Index (HSI) traded at about 10 times estimated earnings on average yesterday, compared with 12.7 for the Standard & Poor’s 500 Index and 10.4 for the Stoxx Europe 600 Index.
Stocks generating revenue from the U.S. fell after the Federal Reserve Bank of Philadelphia’s factory index dropped to minus 16.6 in June, the lowest level since August. Sales of previously owned U.S. homes declined 1.5 percent in May, according to figures from the National Association of Realtors in Washington.
Li & Fung dropped 4.2 percent to HK$14.68. Techtronic Industries Co. (669), a maker of power tools that relies on North America for almost 75 percent of its sales, dropped 2.1 percent to HK$8.89.
“The market is expecting slower growth and the data points are dragging us to the downside now,” said Marco Li, Hong Kong- based portfolio manager at Manulife Asset Management, which oversees $208 billion globally. “People are looking beyond the valuations and fundamentals right now and are focusing on how bad the economy is. Things will have to worsen significantly to have more stimulus coming.”
Cnooc (883) lost 3.2 percent to HK$14.50 after crude oil traded near a nine-month low. The Thomson Reuters/Jefferies CRB Index (CRY) of raw materials retreated 2.1 percent yesterday. The S&P GSCI commodities gauge slid to the lowest level since 2010 and is down 22 percent from a February peak, meeting the definition of being in a bear market.
Construction shares dropped even after the China Banking Regulatory Commission encouraged funding for railways, roads and affordable homes, citing a person with direct knowledge of the confidential proposal. Real-estate developers in China rose.
Anhui Conch Cement fell 1.8 percent to HK$22.20. China Shanshui Cement Group, a manufacturer of the building material, slid 2.2 percent to HK$5.70. Guangzhou R&F Properties Co., which gets all its revenue from China, gained 3.2 percent to HK$10.28.
Hang Seng Index futures expiring this month lost 1 percent to 19,074. The HSI Volatility Index (VHSI) rose 2.5 percent, its first advance in six days, to 22.04, indicating options traders expect a swing of 6.3 percent on the gauge during the next 30 days.
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