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Hong Kong stocks fell, with the city’s benchmark index retreating the most in a week, as developers dropped after the city’s chief executive said the government may curb overseas real estate demand and Premier Wen Jiabao said China should establish a property tax.
Hang Lung Properties Ltd., a developer that gets about 55 percent of its revenue in Hong Kong, fell 2 percent. China Overseas Land & Investment Ltd., a state-controlled mainland developer, sank 1.2 percent. Tencent Holdings Ltd. (700), an internet company, headed to its highest level in two months as Goldman Sachs Group Inc. reiterated a buy rating. Golden Wheel Tiandi Holdings Co. jumped 21 percent on its trading debut.
The Hang Seng Index lost 0.4 percent to 23,289.15 as of 3:32 p.m. in Hong Kong. The Hang Seng China Enterprises Index of mainland companies dropped 1.2 percent to 11,859.19 as a report showed China’s foreign direct investment declined for the first full year since 2009 as manufacturers relocated in search of cheaper labor.
“Hong Kong property prices are pushing into bubble territory which can cause trouble later down the track,” said Nader Naeimi, Sydney-based head of dynamic asset allocation at AMP Capital Investors Ltd., which manages about $126 billion. “The Chinese are getting very sensitive to big rises in property prices because it’s not a healthy development. The property curbs will be an ongoing development.”
Futures on the Standard & Poor’s 500 Index lost 0.2 percent today. The gauge yesterday added 0.1 percent as a rally in retail and transportation companies overshadowed concern about discussions on raising the U.S. government’s debt ceiling.
Hong Kong’s benchmark index surged 23 percent last year as China’s economy showed signs of improvement and as central banks around the globe added stimulus. Shares on the measure traded at 11.3 times estimated earnings yesterday, compared with 13.3 for the S&P 500 and 12 for the Stoxx Europe 600 Index, according to data compiled by Bloomberg.
Hong Kong will have to damp external demand for housing if natives’ needs aren’t met, city Chief Executive Leung Chun-ying told the Legislative Council today in his first policy address. The city will convert more sites for residential use and build up an abundant land reserve that can more than meet short-term needs, he said.
China President Hu Jintao expressed support for Leung’s measures to temper rising housing prices, the Ming Pao Daily reported earlier, citing unidentified people with knowledge of a meeting between the two officials.
Also in China, Premier Wen said the country should “gradually” establish a property taxation system that covers trading and ownership, according to a statement published on the central government’s website.
The Hang Seng Volatility Index rose 3.2 percent to 15, indicating options traders expect a swing of 4.3 percent in the next 30 days. Futures on the Hang Seng Index fell 0.4 percent to 23,281. Volume on the measure was 10 percent below its 30-day average today.
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