Bloomberg News

Hong Kong Stocks Decline as Central Banks Fail to Act

August 03, 2012

Hong Kong stocks fell, paring this week’s gain in the benchmark index, after central banks in China, Europe to the U.S. failed to deliver new stimulus to bolster growth.

Hutchison Whampoa Ltd. (13), an operator of ports that gets 54 percent of revenue from Europe, fell 1.5 percent after European Central Bank President Mario Draghi failed to announce immediate action to stem the region’s debt crisis. Li & Fung Ltd., a supplier to Wal-Mart Stores Inc., slid 2.9 percent ahead of a U.S. employment report. China Yurun Food Group Ltd. (1068) gained 8.7 percent, extending yesterday’s steepest gains since its 2005 listing.

The Hang Seng Index fell 0.9 percent to 19,510.69 at the midday trading break, with three shares falling for each that gained on the 49-member gauge. It is headed for a 1.2 percent gain this week. The Hang Seng China Enterprises Index (HSCEI) of mainland companies dropped 1.2 percent to 9,556.91.

“No monetary easing is not what the market wants to hear,” said Francis Lun, managing director at Lyncean Holdings Ltd., a Hong Kong-based brokerage. “The market had shot up in the last few days in anticipation of easing of monetary policy. Investors just got ahead of themselves.”

The benchmark Hang Seng Index (HSI) fell 9.2 percent from this year’s high in February through yesterday on signs Europe’s debt crisis is worsening while economic growth slows in China and the U.S. The drop reduced the value of shares on the gauge to 10.3 times estimated earnings on average, compared with 13.3 for the Standard & Poor’s 500 Index and 11.1 for Stoxx Europe 600 Index.

Central Banks

THE ECB kept its benchmark interest rate on hold yesterday and the People’s Bank of China said it will keep pursuing “prudent” monetary policy. The U.S. Federal Reserve also refrained this week from adding stimulus.

“There is no real action to support the economy,” said Lewis Wan, Hong Kong-based chief investment officer at Pride Investments Group Ltd., which manages $300 million of assets. “The news did not meet the market’s expectations.”

Hutchison Whampoa, the largest company controlled by Asia’s richest man, Li Ka-shing, slid 1.5 percent to HK$67.65 even after reporting a net income of HK$10.2 billion ($1.3 billion), exceeding a HK$9.55 billion median estimate of five analysts surveyed by Bloomberg News.

Cosco Pacific Ltd. (1199), which operates a port in Greece, fell 3.1 percent to HK$10.48. China Cosco Holdings Co., the nation’s biggest listed shipping company, fell 1.6 percent to HK$3.18.

U.S. Jobs

Li & Fung dropped 2.9 percent to HK$14.62 ahead of the release of a U.S. report expected to show the jobless rate remained at 8.2 percent, according to a Bloomberg News survey of economists. The unemployment rate has been above 8 percent since February 2009.

Man Wah Holdings Ltd. (1999), a sofa maker that gets more than half of its revenue from the U.S., fell 0.7 percent to HK$2.87. Techtronic Industries Co., a maker of power tools that relies on North America for 72 percent of its sales, lost 1.7 percent to HK$10.16.

China Yurun gained 8.7 percent to HK$5.99, extending yesterday’s gains after billionaire Robert Kuok’s Kerry Group Ltd. disclosed it owns a stake in the nation’s second-largest meat supplier.

Futures on the Hang Seng Index retreated 0.9 percent to 19,454. The HSI Volatility Index (VHSI) slid 6.7 percent to 19.77, indicating traders expect a swing of about 5.7 percent in the benchmark index during the next 30 days.

To contact the reporter on this story: Patrick Boehler in Hong Kong at pboehler@bloomberg.net

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


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