Hong Kong Stocks Decline, Erasing Gains; Oil Producers Drop

By Hanny Wan

March 12 (Bloomberg) -- Hong Kong stocks fell, reversing gains, on concern the global recession will erode corporate earnings and damp demand for raw materials.

Sun Hung Kai Properties Ltd. declined 0.8 percent after saying first-half profit excluding property revaluations tumbled a more-than-estimated 27 percent. Bank of East Asia Ltd. dropped 3.9 percent. Cnooc Ltd., China’s biggest offshore oil explorer, dropped 2.9 percent and PetroChina Co. slipped 3.3 percent, after crude prices dropped yesterday.

“A risk is if the financial sector spirals down further. If it doesn’t stabilize, Asian banks may no longer extend loans,” said Arnout van Rijn, chief investment officer at Robeco Hong Kong Ltd., which manages $1.2 billion in Asia. “Sentiment is not as bad as in Europe here in Hong Kong because of China.” He said his fund is “underweight” financials in Asia, although it has been buying Japanese and Chinese stocks.

The Hang Seng Index fell 56.78, or 0.5 percent, to 11,873.88 at the 12:30 p.m. break, after climbing as much as 0.9 percent.

The benchmark index has lost 17 percent this year, dragging its valuation to 10 times estimated earnings, down from 18.6 times at the beginning of 2008.

The Hang Seng China Enterprises Index, which tracks so- called H shares of Chinese companies, lost 1.5 percent to 6,899.64.

Cnooc dropped 2.9 percent to HK$6.65. PetroChina, the nation’s No. 1 oil producer, slid 3.3 percent to HK$5.27.

Crude oil futures plunged 7.4 percent to $42.33 a barrel in New York yesterday, the lowest since March 3. The contract was at $43.04 in after-hours trading as of 12:40 p.m. in Hong Kong.

Sun Hung Kai

Sun Hung Kai declined 0.8 percent to HK$58.70. The world’s biggest builder by market value said yesterday first-half profit excluding property revaluations fell to HK$4.54 billion ($585 million) as Hong Kong’s economic slump reduced home sales.

Bank of East Asia, which last month reported its first loss in four decades, retreated 3.9 percent to HK$12.70. The bank announced yesterday several senior management changes including the appointment of William Cheng as chief financial officer, replacing Daniel Wan.

Twenty-two stocks on the 42-member Hang Seng Index declined while 19 climbed. March futures slipped 1.2 percent to 11,788.

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