By Kana Nishizawa - Oct 3, 2011 3:48 PM GMT+0700
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Stock traders work on the trading floor at the Hong Kong Stock exchange in Hong Kong, China. The Hang Seng China Enterprises Index of Chinese companies listed in Hong Kong declined 6.4 percent to 8,348.50. Photographer: Dale de la Rey/Bloomberg
Hong Kong’s Hang Seng Index (HSI) fell to its lowest close since 2009, on concern China’s economy is slowing and after U.S. consumer spending weakened amid a drop in incomes in the world’s largest economy.
Techtronic Industries Co. (669), maker of Ryobi power tools that counts North America as its largest market, sank 8.3 percent. Ping An Insurance Group Co., China’s No. 2 insurance company by market value, tumbled 13 percent. Jiangxi Copper Co., China’s No. 1 producer of the metal by market value, dropped 12 percent after commodity prices declined. Macau casino operator Galaxy Entertainment Group Ltd. (27) tumbled 19 percent on concern growth will slow.
The Hang Seng Index fell 4.4 percent to 16,822.15, its lowest close since May 2009. All but four stocks retreated in the 46-member gauge, which last week capped its worst quarterly loss in a decade. The Hang Seng China Enterprises Index of Chinese companies listed in Hong Kong declined 5.7 percent to 8,408.26. The gauge tumbled 12 percent last week, after a manufacturing gauge contracted for a third month.
“When the macro environment is bad, it negatively affects the micro environment in Hong Kong,” said Francis Lun, managing director at Lyncean Holdings Ltd., an investment holding company in Hong Kong. “Investors are trying to get out of the stock market and wait for it to bottom out.”
Worst Since 2001
The Hang Seng Index last week posted its steepest quarterly drop since the three months ended September 2001, when terrorist attacks in the U.S. sent global markets tumbling. The benchmark was the second-worst performer among developed markets as Chinese banks and developers tumbled, and amid concern that global economies may enter a recession. Shares on the index traded at 9 times forecast earnings at the last close, compared with 11.4 times for the Standard & Poor’s 500 Index.
Techtronic sank 8.3 percent to HK$4.85. Li & Fung Ltd., a supplier of clothes and toys to retailers including Wal-Mart Stores Inc., retreated 5.9 percent to HK$12.44. HSBC Holdings Plc (5), the U.K.-based lender that made a fifth of its revenue in North America last year, slid 4.2 percent to HK$58.35.
Futures on the Standard & Poor’s 500 Index slipped 0.4 percent today. In New York, the index fell 2.5 percent on Sept. 30, sending the measure to its biggest quarterly drop since 2008, after reports from China and Germany fueled concerns the global economy is slowing.
U.S. Spending
Consumer spending in the U.S. slowed in August as incomes unexpectedly dropped for the first time in almost two years, forcing households to dip into savings. Purchases rose 0.2 percent after a 0.7 percent increase in July, Commerce Department figures showed on Sept. 30. Incomes decreased 0.1 percent, the first decline since October 2009. Economists had forecast incomes would rise 0.1 percent, according to a Bloomberg survey.
In China last week, the purchasing managers’ index, released by HSBC Holdings Plc and Markit Economics, showed a reading of 49.9 for September, unchanged from August.
“Economic indicators are suggesting that the economy in mainland China is slowing,” said Linus Yip, chief strategist at First Shanghai Securities in Hong Kong. Concerns of slowing liquidity in banks are dragging down financial and property stocks, he said.
Ping An tumbled 13 percent to HK$38.30, while China Minsheng Banking Corp. retreated 10 percent to HK$4.29. Agile Property Holdings Ltd. (3383), which develops properties in the Guangdong province, sank 18 percent to HK$4.21. China Overseas Land & Investment Ltd. (688), a developer controlled by the nation’s construction ministry, dropped 11 percent to HK$10.06.
Slowdown in China
The Purchasing Managers’ Index published Oct. 1 by the China Federation of Logistics and Purchasing rose for a second month, to 51.2. Readings above 50 signal expansion.
“The number that came out over the weekend isn’t all that good,” Louis Kuijs, Hong Kong-based chief Asia economist at MF Global Holdings Ltd., said today on Bloomberg television. “If you adjust for seasonal effects there has been some decline in the overall number. That is indicating in my mind that China’s economy is still growing, but we are seeing a slowdown.”
Developers also slid after Yifan Hu, Haitong International Research Ltd.’s head of research and chief economist, said about half of China’s commercial real-estate companies may be forced to stop operating in the next three to five years as the government tightens housing-market policies.
Galaxy Entertainment tumbled 19 percent to HK$9.42. Sands China Ltd., a Macau casino operator, sank 14 percent to HK$15.98, while Wynn Macau Ltd. (1128), a unit of the casino operator founded by billionaire Steve Wynn, slid 11 percent to HK$16.74.
Investors ‘Afraid’
Macau casinos are being hurt by speculation that steps by the Chinese government to tighten credit are leaving VIP gamblers with less cash to play with, Philip Tulk, head of Asian conglomerates and gaming research at Royal Bank of Scotland Group Plc., said in an interview in Hong Kong.
“People are afraid and selling their winners,” Tulk said. “In this kind of market, anything that’s up gets sold. It’s like a whack-o-mole.”
Cnooc Ltd. (883) China’s largest offshore oil producer, fell 6.5 percent to HK$12.16. PetroChina Co., the nation’s No. 1 oil company by market value, slid 2.5 percent to HK$9.43. Jiangxi Copper plunged 12 percent to HK$12.18. Minmetals Resources Ltd., a copper and alumina producer, slumped 10 percent to HK$2.67.
Oil prices fell today, extending declines after the worst quarter since 2008. Crude for November slid as much as 2.3 percent in electronic trading in the New York. A measure of primary metals traded in London fell 3.4 percent on Sept. 30, when copper futures declined for a third straight quarter.
Railway Shares Drop
Railway-related shares declined after 21st Century Business Herald reported China postponed construction of 80 percent of its railway projects, pending clarification of government policies, citing an unidentified person close to the railway ministry. CSR Corp., a mainland maker of railway equipment, tumbled 13 percent to HK$2.45. China Railway Group Ltd. (390), a builder of the nation’s railroads, fell 1.9 percent to HK$1.55.
Among other stocks that fell, Yanzhou Coal Mining Co., China’s fourth-biggest coal producer, sank 14 percent to HK$14.68 after it obtained government approvals to acquire Canadian potash exploration permits for $260 million.
“Investors certainly do not like it when Yanzhou said it’s entering a field that the company is not familiar with or has experience in,” said Lawrence Lau, a Hong Kong-based analyst at Bank of China Ltd. “Potash is not even remotely part of Yanzhou Coal’s core business.”
Futures on the Hang Seng Index slid 3 percent to 16,897. The HSI Volatility Index gained 2.9 percent to 44, indicating options traders expect a swing of 12.6 percent in the Hang Seng Index in the next 30 days.
To contact the reporter on this story: Kana Nishizawa in Tokyo at knishizawa5@bloomberg.net
To contact the editor responsible for this story: John McCluskey at j.mccluskey@bloomberg.net.
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