Bloomberg News

Hong Kong Stocks Fall on Earnings Concern, Euro Debt

August 22, 2012

Hong Kong stocks fell, with the benchmark index capping its sixth decline in eight days, amid concern corporate earnings are worsening and ahead of euro-area finance ministers meetings this week to discuss a bailout package for debt-stricken Greece.

China BlueChemical Ltd. slid 5.5 percent after reporting first-half net profit fell from a year earlier. HSBC Holdings Plc (5), Europe’s biggest lender, slid 0.6 percent. Belle International Holdings Ltd. (1880), a women’s footwear retailer that gets nearly all its revenue in China, lost 4.6 percent after its chief executive officer said he’s not optimistic about the sales outlook. Hengdeli Holdings Ltd., the retail partner of Swatch Group AG in China, jumped 9.8 percent after its net income beat estimates.

The Hang Seng Index (HSI) fell 1.1 percent to 19,887.78 at the close on trading in Hong Kong, with all but one stock dropping on the 49-member gauge. The Hang Seng China Enterprises Index (HSCEI) of mainland companies slipped 1.3 percent to 9,698.83.

“Demand is not so good in China because economic growth in China is slowing down,” said Linus Yip, chief strategist at First Shanghai Securities in Hong Kong. “When we talk about the European debt crisis, we still have a long way to go.”

The Hang Seng Index fell 8.3 percent from this year’s high on Feb. 29 amid a slowdown in China growth and concern Europe’s spreading debt crisis will crimp global demand. Shares on the gauge trade at 10.5 times estimated earnings on average, compared with 9.5 for the Shanghai Composite Index and 13.7 for the Standard & Poor’s 500 Index.

Earnings Season

China BlueChemical slid 5.5 percent to HK$4.60 after reporting first-half net profit of 908.5 million yuan ($143 million), down from 1.03 billion yuan a year ago.

China Coal Energy Co. dropped 2.8 percent to HK$7.05 after reporting first-half net profit of 5.12 billion yuan, compared with 5.58 billion yuan a year ago.

Of the 109 companies on the Hang Seng Composite Index that have posted semi-annual results, and for which Bloomberg has estimates, 43 percent missed expectations.

Belle International declined 4.6 percent to HK$14.18 after CEO Sheng Baijiao said he expected consolidation in China’s sportswear market in the future.

Hengdeli Holdings surged 9.8 percent to HK$2.36. The Chinese seller of Breguet and Cartier watches said it expects sales growth to improve next year. Net income increased 26 percent to 563 million yuan in the six months ended June, the retailer said yesterday after close of market. The profit beat the 448.8 million-yuan average estimate of analysts surveyed by Bloomberg.

Futures on the Hang Seng Index slid 1.4 percent to 19,853. The HSI Volatility Index (VHSI) rose 4.8 percent to 19.57, indicating traders expect a swing of about 5.6 percent for the equity benchmark in the next 30 days.

Euro Crisis

French President Francois Hollande is due in Berlin tomorrow to discuss the crisis with German Chancellor Angela Merkel. The European Central Bank is working on plans to buy bonds while a senior lawmaker with Merkel’s government said yesterday that concessions are possible for Greece.

Companies that do business in Europe declined. HSBC Holdings slid 0.6 percent to HK$68.75. Hutchison Whampoa Ltd. (13), which gets 55 percent of its revenue in the region, fell 1 percent to HK$69.30.

To contact the reporter on this story: Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net

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


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