Hong Kong stocks fell, with the benchmark index sliding after the biggest advance in two weeks, before the Federal Reserve begins a policy meeting today at which it’s expected to trim stimulus. Wing Hang Bank Ltd. (302) soared after saying shareholders were approached in a takeover bid.
Cnooc Ltd. (883), China’s biggest offshore oil explorer, slid 1 percent as crude prices fell. Galaxy Entertainment Group Ltd. (27), the casino operator controlled by billionaire Lui Che-woo, slumped 2.2 percent after yesterday rising to a record high. Wing Hang surged 39 percent to lead gains among family-run lenders including Dah Sing Banking Group Ltd. (2356)
The Hang Seng Index lost 0.3 percent to 23,180.52 at the close in Hong Kong, with volume 19 percent lower than the 30-day average. Shares jumped yesterday after former U.S. Treasury Secretary Lawrence Summers withdrew from consideration to lead the central bank. The Hang Seng China Enterprises Index (HSCEI), also known as the H-share index, slipped 0.5 percent to 10,650.64.
“Yesterday the market overreacted to Summers’s exit from the competition from Fed chairmanship,” said Lewis Wan, Hong Kong-based chief investment officer at Pride Investments Group Ltd. “Today we’re having a minor correction but overall the trend itself is on the upside, especially for the Hong Kong market because the Chinese economy is recovering.”
The H-share index entered a bull market last week after rebounding more than 20 percent from a June low, while the Hang Seng Index (HSI) erased its 2013 loss. China data including exports and factory output added to signs the world’s second-biggest economy is strengthening. Hong Kong’s equity benchmark traded at 11.1 times estimated earnings, compared with 15.36 for the Standard & Poor’s 500 Index.
The Federal Open Market Committee meets today and tomorrow to consider whether to cut its $85 billion in monthly bond buying, with economists surveyed by Bloomberg predicting a $10 billion reduction in the pace.
Futures on the S&P 500 fell 0.2 percent today. The equity gauge added 0.6 percent yesterday in New York after Summers opened the way for Janet Yellen, who some investors say may favor slower tapering of stimulus, to possibly lead the central bank. Oil prices slid as tensions over Syria’s chemical weapons eased after the U.S. and Russia agreed on a plan demanding destruction of the arms.
West Texas Intermediate crude futures fell as much as 0.9 percent after closing yesterday at the lowest in three weeks. Cnooc slumped 1 percent to HK$16.04. PetroChina Co., the nation’s biggest energy company, declined 0.7 percent to HK$8.76.
Wing Hang surged a record 39 percent to HK$116.80. Major shareholders including members of Chairman Patrick Fung’s family and related trusts are holding preliminary talks for a sale that would trigger a mandatory buyout offer, the bank said in a filing to Hong Kong’s stock exchange yesterday.
Wing Hang joins Chong Hing Bank Ltd. (1111) in acquisition talks as the city’s role as an international yuan center attracts mainland financial institutions seeking overseas expansion. Chong Hing, Hong Kong’s smallest family-run lender, yesterday closed at a record high after the Oriental Daily newspaper reported that the sale of a stake may be decided this week. The stock rose 3.3 percent to HK$32.75 today.
“Hong Kong is a very good stepping stone, making small banks a good candidate to invest outside,” Wan at Pride Investments said. Dah Sing has a high chance of becoming an acquisition target as there are not many banks left in the city, he said.
Dah Sing jumped 18 percent to HK$13.32, its biggest gain on record. Bank of East Asia Ltd. advanced 5.7 percent to HK$33.55, the steepest gain on the Hang Seng Index.
Galaxy dropped 2.2 percent to HK$54.15, the second-biggest drop on the Hang Seng Index. Melco Crown Entertainment Ltd. (6883), the Macau venture between Australian billionaire James Packer and a son of casino mogul Stanley Ho, retreated 3.7 percent to HK$80.50 after yesterday also closing at a record. Macau-related stocks jumped yesterday after the city’s assembly polls were held over the weekend.
“Since the legislative body was elected, investors perceive it as more stable atmosphere in Macau,” Jackson Wong, vice president of Hong Kong-based brokerage Tanrich Securities Co., said yesterday.
The Conference Board’s leading index for China released today climbed 0.7 percent to 269.3 last month from 267.4 in July. The nation’s foreign direct investment increased 0.6 percent from a year ago in August, the Ministry of Commerce, less than the 12.5 percent estimated by economists and the 24.1 percent gain in July.
Bank of America Merrill Lynch last week joined Goldman Sachs Group Inc., JPMorgan Chase & Co. and Deutsche Bank AG in raising predictions for economic expansion in China. The government has defended its target of 7.5 percent annual growth.
Futures on the Hong Kong gauge slid 0.7 percent to 23,174. The HSI Volatility Index rose 2.8 percent to 17.27, indicating traders expect the benchmark equity index to swing 5 percent in the next 30 days.
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