Hong Kong Stocks Drop the Most in One Month; Foxconn Plunges

By Hanny Wan

Jan. 15 (Bloomberg) -- Hong Kong’s benchmark stock index fell by the most in a month on concern slowing demand is deepening the global economic slump.

Foxconn International Holdings Ltd., the world’s largest contract maker of mobile phones, plunged 5.1 percent after U.S. retail sales dropped at more than double the pace economists expected. Esprit Holdings Ltd., a retailer that makes more than four-fifths of its sales in Europe, tumbled 8.1 percent after a report showed Germany’s economy is deteriorating. HSBC Holdings Plc fell 5.7 percent, extending yesterday’s drop after Morgan Stanley earlier this week predicted declining earnings may force the bank to raise as much as $30 billion.

“This will be a pretty tough year,” Wendy Liu, head of China research at RBS ABN Amro, said on Bloomberg Television. “At the street level, the sentiment is a bit more negative than among some of the investors that are hoping the worst is over. You don’t quite see that in economic data yet.”

The Hang Seng Index lost 686.59, or 5 percent, to 13,018.02 as of 3:01 p.m. local time, its largest slump since Dec. 12 and set for its lowest close since Nov. 25. The Hang Seng China Enterprises Index, which tracks Chinese companies’ so-called H shares, declined 4.7 percent to 6,878.02.

The Hang Seng Index tumbled 48 percent last year, the most since 1974, as the world’s biggest economies slipped into recessions. The benchmark index has declined 9.5 percent this year.

Foxconn retreated 5.1 percent to HK$2.99. Li & Fung Ltd., which sells goods to Wal-Mart Stores Inc., fell 4.6 percent to HK$12.52.

Esprit Tumbles

Sales at U.S. retailers lost 2.7 percent in December, the sixth-straight month of declines, the longest losing streak since comparable records began in 1992, the Commerce Department said yesterday.

Esprit tumbled 8.1 percent to HK$37.30, its largest slump since Dec. 17. Germany’s economy, Europe’s largest, may have contracted as much as 2 percent in the fourth quarter, the country’s statistics office said yesterday. That would be its biggest decline in more than two decades.

HSBC, Europe’s largest bank by market value, lost 5.7 percent to HK$66, adding to a three-day, 6.3 percent decline, and headed for its lowest close since February 1999. Morgan Stanley predicted the bank’s profit is likely to fall “sharply” this year and won’t recover until 2011 at the earliest, according to a note dated Jan. 13.

All stocks on the 42-member Hang Seng Index dropped, except for Bank of China Ltd. January futures slipped 5.6 percent to 12,940.

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

Mainland Chinese developers: China Overseas Land & Investment Ltd. (688 HK), a developer controlled by China’s construction ministry, dropped 32 cents, or 3 percent, to HK$10.48. Shimao Property Holdings Ltd. (813 HK), the Chinese developer controlled by billionaire Xu Rongmao, declined 30 cents, or 6.3 percent, to HK$4.45. Country Garden Holdings Co. (2007 HK), a Chinese real estate company, retreated 11 cents, or 6.7 percent, to HK$1.54.

Home prices and sales in China, which fell last year for the first time in a decade, will continue dropping until they reach a “reasonable” level and will rebound in 2011, property agency DTZ said. Prices in Beijing, Shanghai, Guangzhou and Shenzhen, the “first tier” cities, fell 17 percent last year and will drop 10 percent this year and 5 percent in 2010 before rising in 2011, said Alan Chiang, head of DTZ’s China residential business.

Nine Dragons Paper (Holdings) Ltd. (2689 HK) sank 24 cents, or 13 percent, to HK$1.61. China’s biggest maker of containerboard paper for packaging said yesterday there was a “substantial” profit reduction in the six months ended Dec. 31.

Tianjin Port Development Holdings Ltd. (3382 HK), a Chinese container port operator, fell 11 cents, or 6.1 percent, to HK$1.70, the most since Dec. 12 after Merrill Lynch & Co. cut its stock rating to “underperform” from “buy,” citing poor cost control.

ZTE Corp. (763 HK) plunged HK$2.35, or 9.6 percent, to HK$22.05. China’s second-biggest maker of phone-network equipment was cut to “sell’ from “buy” by Citigroup Inc., which said recent gains in the shares more than accounted for the prospect of increased spending on high-speed wireless services.

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