Hong Kong Stocks Drop in Longest Losing Streak in Seven Months

By Hanny Wan

Aug. 14 (Bloomberg) -- Hong Kong stocks fell for a fifth day, the longest losing streak in seven months, after Macquarie Equity Market Group cut its rating on Hong Kong Exchanges & Clearing Ltd. and Merrill Lynch & Co. said the credit crisis is far from over.

Hong Kong Exchanges plunged to the lowest since June 2007. China Construction Bank Corp., which had $1 billion of subprime mortgage-backed securities at the end of 2007, dropped to a five- week low. A gauge tracking financial shares was the only decliner among four industry groups in the Hang Seng Index.

Li & Fung Ltd., a supplier of clothes, toys and home furniture to Wal-Mart Stores Inc., slumped after Morgan Stanley cut its share-price forecast for the stock.

The Hang Seng fell 24.54, or 0.1 percent, to 21,268.78 at the 12:30 p.m. break, adding to a four-day, 3.7 percent drop and on course for its longest losing streak since the five-day period ended Jan. 16.

``We'd like to see how far this flu is going to spread,'' said Edgar Chuan, managing director at Descartes Investment Management Ltd. in Hong Kong. ``Right now it's very hard to bottom-fish. The best thing is to wait for everything to stabilize.''

The Hang Seng, which lost as much as 0.5 percent and climbed as much as 0.8 percent in the morning session, has retreated 24 percent this year as mounting credit-market losses and gains in raw-material prices slowed global economic growth.

The Hang Seng China Enterprises Index, which tracks so- called H shares of Chinese companies, added 0.1 percent to 11,117.09.

China Netcom

China Netcom Group Corp. retreated to a five-week low after Deutsche Bank AG cut its rating on the stock to ``hold.''

Cnooc Ltd., China's biggest offshore oil producer, and Aluminum Corp. of China Ltd. climbed. They were the biggest gainers on the Hang Seng Index after oil and metals prices rose.

Hong Kong Exchanges, which operates Asia's third-biggest stock market, retreated 4.4 percent to HK$99, extending its decline this year to 55 percent, the second-steepest drop on the Hang Seng Index.

Macquarie reduced its rating on the stock to ``neutral'' from ``outperform,'' according to a research note today. Goldman, Sachs & Co. trimmed its share-price estimate for the stock by 4.5 percent to HK$126, according to a report today.

Hong Kong Exchanges' Chairman Ron Arculli said in a Bloomberg TV interview today that declining trading volume is a ``common trend'' globally.

Construction Bank

Construction Bank fell 1.6 percent to HK$6.10, headed for its worst close since July 8. Industrial and Commercial Bank of China Ltd., which held $1.22 billion of U.S. subprime-related securities at the end of March, lost 1.5 percent to HK$5.17.

The Hang Seng Finance Index's 1 percent drop made it the only group loser on the broader Hang Seng Index.

The credit crisis is ``broad, deep, and global'' and ``far from over'' for financial companies even after they reported $500 billion in writedowns and credit losses, Merrill Lynch's chief investment strategist said.

Li & Fung tumbled 8.8 percent to HK$23.90, making it the largest percentage loser on the Hang Seng Index. Morgan Stanley trimmed its share-price target for the stock to HK$36 from HK$39, according to a research note today.

Netcom, China's second-biggest fixed-line carrier, dropped 3.2 percent to HK$21.40, headed for its worst close since July 8. The stock was the third-largest loser by percentage on the Hang Seng Index today. China Unicom Ltd., the nation's No. 2 mobile- phone carrier, lost 2 percent to HK$14.50. Deutsche Bank cut its ratings on Netcom and Unicom to ``hold'' from ``buy,'' according to a research note.

Cnooc Jumps

Cnooc jumped 7.1 percent to HK$11.16, set for its highest close since Aug. 4. PetroChina Co., the nation's largest oil producer, rose 1.5 percent to HK$9.98. Aluminum Corp., also known as Chalco, added 6.4 percent to HK$6.78.

Crude oil futures advanced 2.65 percent to $116 a barrel in New York yesterday, the biggest gain since July 30. The contract was recently at $116.89 in after-hours trading.

A measure of six metals traded on the London Metal Exchange rose 3.2 percent, its largest gain since March 27.

Twenty-three stocks on the 43-member Hang Seng Index declined while 19 climbed. August futures added 0.2 percent to 21,238.

To contact the reporter on this story: Hanny Wan in Hong Kong at hwan3@bloomberg.net