Hong Kong Stocks Decline to Two-Week Low; Shaw Brothers Soars

By Hanny Wan

Dec. 23 (Bloomberg) -- Hong Kong stocks fell, dragging the benchmark index to the lowest level in more than two weeks, on concern a smaller-than-expected interest-rate cut in China will fail to prevent the nation’s economy from slowing.

Aluminum Corp. of China Ltd., the nation’s No. 1 producer of the metal, tumbled 9.3 percent. Cathay Pacific Airways Ltd. declined 2.2 percent after the South China Morning Post said the airline posted lower sales. Shaw Brothers (Hong Kong) Ltd., which controls the city’s largest broadcaster, rallied 55 percent after saying its largest stockholder offered to buy all the shares it doesn’t already own.

“It’s relative -- compared with the rate cuts in the U.S. and Japan, China’s rate cut is less than expected,” said Desmond Tjiang, chief investment officer for Asia excluding Japan at Fortis Investments, which oversees $6.5 billion. “It probably changes views for the very short-term investors.”

The Hang Seng Index fell 460.21, or 3.2 percent, to 14,162.27 as of 2:36 p.m. local time, set for its lowest close since Dec. 5. The measure has lost 49 percent in 2008, on course for its worst annual performance since 1974, as the global financial crisis dragged economies worldwide into recessions.

The Hang Seng China Enterprises Index, which tracks so- called H shares of mainland companies, retreated 4.7 percent to 7,757.23.

Slowing growth has prompted central banks worldwide to lower borrowing costs. The Bank of Japan reduced its benchmark rate to 0.1 percent from 0.3 percent on Dec. 19, three days after the U.S. Federal Reserve lowered its main interest rate to as low as zero. Hungary’s central bank cut its key interest rate by half a percentage point to 10 percent yesterday.

Global Rate Cuts

The People’s Bank of China cut interest rates for the fifth time in three months after trade growth collapsed because of recessions in the U.S., Europe and Japan. The one-year lending rate will drop by 0.27 percentage point and the deposit rate by the same amount from today. Citigroup Inc. and HSBC Holdings Plc had anticipated a 54-basis-point reduction.

“Given the slowdown in exports and manufacturing, China will cut rates aggressively going forward,” Tjiang said. He favors property and construction stocks in China, and the less- than-expected rate cut hasn’t changed his view on mainland developers because he expects “more plans from the government to support the sector,” he said.

Chalco, as Aluminum Corp. is known, tumbled 9.3 percent to HK$4.11, the sharpest drop on the Hang Seng Index. China Overseas Land & Investment Ltd., a developer controlled by China’s construction ministry, declined 4.9 percent to HK$10.64.

Property Developers

Hong Kong’s developers also fell after the Hong Kong Economic Times said Cheung Kong (Holdings) Ltd. expects property sales to slow to more than HK$10 billion ($1.3 billion) next year, half of the 2008 figure. The report cited Justin Chiu, an executive director at the company.

Cheung Kong, the city’s No. 1 developer by market value, declined 6.9 percent to HK$71.70. Sino Land Co., a Hong Kong- based developer, plunged 6.7 percent to HK$7.77.

Cathay Pacific, Hong Kong’s largest carrier, fell 2.2 percent to HK$8.30. Cathay Pacific’s first- and business-class sales plunged 26 percent in week ended Dec. 13 as a global recession damps demand, the South China Morning Post said, citing comments made by the airline’s Chief Executive Officer Tony Tyler in an internal e-mail to staff.

Shaw Brothers soared 55 percent to HK$12.60. The stock resumed trading today after a six-day suspension. A trust controlled by Shaw Chairman Sir Run Run Shaw, now holding 74.9 percent of Shaw Brothers stock, will offer HK$13.35 in cash for each remaining share, according to a statement yesterday.

All but three stocks on the 42-member Hang Seng Index declined. December futures slipped 3.9 percent to 14,123.

The following stocks rose or fell. Stock symbols are in brackets after company names.

Oil producers: Cnooc Ltd. (883 HK), China’s biggest offshore oil producer, slipped 35 cents, or 5 percent, to HK$6.65. PetroChina Co. (857 HK), the nation’s largest oil producer, declined 35 cents, or 5.1 percent, to HK$6.46.

Crude oil futures dropped 5.8 percent to $39.91 a barrel in New York yesterday. The contract was recently at $39.63 in after-hours trading.

China Life Insurance Co. (2628 HK), the nation’s biggest insurer, dropped 90 cents, or 3.8 percent, to HK$22.60. American International Group Inc. may list its American International Assurance unit in Hong Kong after selling a minority stake to strategic investors, Ming Pao Daily News reported, citing an unidentified person. China Life is keen to buy shares in AIA to expand its earnings base outside its home nation to more than half of Asia, Ming Pao said.

ESun Holdings Ltd. (571 HK) surged 8 cents, or 12 percent, to 75 Hong Kong cents. The stock resumed trading today after being suspended yesterday. The company, building a studio and casino complex in Macau, said yesterday it has been restrained by a court order from a planned sale of shares and warrants to fund its media and entertainment businesses.

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