Hong Kong Stocks Decline, Led by Property Shares; Hopson Slumps

By Hanny Wan

Feb. 20 (Bloomberg) -- Hong Kong stocks fell, with the benchmark index set for its steepest weekly drop in five weeks, as the slowing economy erodes demand for real estate.

Sun Hung Kai Properties Ltd., Hong Kong’s No. 1 property company by market value, retreated 3.6 percent after a real- estate agency said office rents slumped last month. Swire Pacific Ltd., one of the city’s biggest office landlords, dropped 2.9 percent. Hopson Development Holdings Ltd. plunged 25 percent after the Apple Daily newspaper said the company’s chairman is under investigation by Chinese law enforcers.

“Sentiment remains very weak,” said Mona Chung, a Hong Kong-based fund manager at Daiwa Asset Management Ltd., which oversees about $2 billion. “We haven’t been aggressive in the long time. We don’t see any catalyst boosting the market yet.”

The Hang Seng Index declined 326.09, or 2.5 percent, to 12,697.27 as of 3:13 p.m. local time, extending its losses this week to 6.3 percent. That would be the gauge’s worst performance since the week ended Jan. 16.

The Hang Seng China Enterprise Index, which tracks so- called H-shares, lost 2.8 percent to 7,060.63.

The Hang Seng Index has lost 12 percent this year amid mounting signs of an economic slowdown, dragging its valuation to 10 times estimated earnings, down from 18.7 times at the beginning of 2008. Hong Kong’s commissioner to the U.S. said yesterday the city’s economy grew between 3 percent and 3.5 percent last year, about half the 6.4 percent pace in 2007.

Sun Hung Kai retreated 3.6 percent to HK$59.95. Cheung Kong (Holdings) Ltd., the city’s No. 2 real estate company by market value, fell 3.1 percent to HK$62.90. Swire Pacific dropped 2.9 percent to HK$46.60. The Hang Seng Property Index’s 2.8 percent decline was the sharpest among the four industry groups tracked by the Hang Seng Index.

Share Sale

Prime office rents in Hong Kong fell 17 percent in January from a year earlier as landlords sought to retain tenants, Colliers International said yesterday.

“I don’t see how property stocks can possibly rise,” said Castor Pang, a Hong Kong-based strategist at Sun Hung Kai Securities Ltd. “There’s no fundamentals whatsoever to support.”

Chaoda plunged 7.3 percent to HK$5.21, its steepest drop since Dec. 23. China’s largest listed vegetable grower sought to sell 80.4 million new shares at HK$4.94 to HK$5.17 each, according to a share sale document.

Hopson plunged 25 percent to HK$3.62, after slumping as much as 51 percent. The Hong Kong-based developer of real estate in China denied a report in the Apple Daily newspaper that Chairman Chu Mang Yee is under investigation by mainland law enforcement.

“What’s most scary is that the company’s management is being investigated,” Pang said.

Macau stocks rallied after the Guangdong provincial government agreed to allow residents to travel to neighboring Hong Kong and Macau more frequently.

Galaxy Entertainment Group Ltd., one of six casino license holders in Macau, surged 7.6 percent to HK$1.27. Melco International Development Ltd., controlled by the son of Macau gaming tycoon Stanley Ho, jumped 8.7 percent to HK$2.24.

Officials from Guangdong, Macau and Hong Kong met yesterday and agreed to enact measures allowing more mainland residents to visit the two cities, Hong Kong’s government said yesterday.

All stocks on the 42-member Hang Seng Index declined except for Li & Fung Ltd., which added 1.8 percent. February futures retreated 2.8 percent to 12,641.

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

Chaoda Modern Agriculture (Holdings) Ltd. (682 HK), China’s largest listed vegetable grower, tumbled 7.3 percent as it sought HK$415.7 million ($54 million) in a share sale.

China BlueChemical Ltd. (3983 HK) slid 5.7 percent to HK$3.95. The producer of nitrogen fertilizers had its rating cut to “sell” from “buy” by Citigroup Inc., which said earnings will decline this year.

Nine Dragons Paper Holdings Ltd. (2689 HK), China’s biggest maker of containerboard paper for packaging, sank 9.5 percent to HK$2.38. Morgan Stanley cut its rating on the stock to “equal- weight” from “overweight,” saying the company needs to reduce its gearing further.

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