Tuesday 11 November 2008

Hong Kong Stocks Fall for First Time in 3 Days; HSBC Drops

Hong Kong’s benchmark stock index fell for the first time in three days, as concerns over profit growth overshadowed speculation that easing inflation in China will offer room for further interest-rate cuts to bolster growth.

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Hong Kong Stocks Fall for First Time in 3 Days; HSBC Drops

By Chua Kong Ho
11 November 2008

(Bloomberg) – Hong Kong’s benchmark stock index fell for the first time in three days, as concerns over profit growth overshadowed speculation that easing inflation in China will offer room for further interest-rate cuts to bolster growth.

HSBC Holdings Plc, Europe’s biggest bank, dropped 1.5 percent after setting aside a more-than-estimated $4.43 billion to cover bad loans in the U.S. Li & Fung Ltd., a supplier to Wal-Mart Stores Inc., tumbled 10 percent after UBS AG cut its share-price estimate, citing weak consumer demand. Industrial & Commercial Bank of China Ltd. gained 1.8 percent after inflation cooled to the slowest pace in 17 months in October.

“All things being equal, falling rates are a positive: but remember, not all things are equal as poor earnings more than offset rate drops for most corporates,” said Howard Wang, who oversees about $10 billion at JF Asset Management in Hong Kong.

The Hang Seng Index fell 87.48, or 0.6 percent, to 14,657.15 at the 12:30 p.m. local-time break, after earlier gaining as much as 0.7 percent. The Hang Seng China Enterprises Index, which tracks so-called H shares, rose 1.1 percent, adding to yesterday’s 9.1 percent surge after China pledged a $586 billion stimulus package to bolster growth.

The Hang Seng Index has surged 33 percent since Oct. 27, its worst close since May 2004, after China cut interest rates for the third time in two months and Hong Kong followed the U.S. rate reduction last month.

The gauge is still down 47 percent this year as global financial turmoil prompted Hong Kong to guarantee bank deposits last month and to form a task force led by the city’s Chief Executive Donald Tsang aimed at alleviating the impact of the credit crisis on the local economy.

‘Global Recession’

China’s consumer prices rose 4 percent in October from a year earlier, the statistics bureau said today, after gaining 4.6 percent in September. That compared with the 4.2 percent median estimate in a Bloomberg News survey of economists.

HSBC fell 1.5 percent to HK$90.95. Europe’s biggest bank forecast “further deterioration” and set aside $4.3 billion in the third quarter to cover rising late payments on mortgage loans and credit cards, exceeding the $3.7 billion median estimate in a Bloomberg survey of analysts.

“A global positioning exposes the group to a global recession,” wrote JPMorgan Chase & Co. analysts Sunil Garg and Carla Antunes da Silva in a note today, cutting their share-price estimate by 25 percent to HK$82. They maintained an “underweight” rating on the stock.

Li & Fung declined 10 percent to HK$13.10, a fourth-straight loss and the steepest percentage decline on the Hang Seng Index.

The Hong Kong-based company said Nov. 8 that it will freeze hiring in most locations and may fire some workers as “worsening economic conditions” hurt some customers.

‘Hard Landing’

UBS cut its stock-price estimate by 39 percent to HK$24.40, citing a “more pessimistic outlook” in U.S.-consumer demand.

ICBC, China’s largest bank, gained 1.8 percent to HK$4.01. Bank of China Ltd. advanced 2.7 percent to HK$2.31.

“Avoiding a hard-landing of the economy is the priority for policy makers,” said Chen Xingdong, chief China economist at BNP Paribas SA in Beijing. “The fiscal stimulus is a big help but there is much room for the central bank to cut interest rates still.”

The following stocks also rose or fell in Hong Kong. Stock symbols are in parentheses after company names:

China Eastern Airlines Corp. (670 HK), the country’s third-largest carrier, slid 3 cents, or 3 percent, to HK$0.98. The airline is taking about a tenth of its fleet out of service, Board Secretary Luo Zhuping said in a phone interview, as the global economic slowdown crimps travel in the world’s most populous nation.

Fosun International Ltd. (656 HK), a Shanghai-based investment company, gained 19 cents, or 9.6 percent, to HK$2.17. Its unit plans to sell a 10.9 percent stake in Zhaojin Mining Industry Co. to Shanghai Yuyuan Tourist Mart Co. for 394.3 million yuan ($58 million).

Semiconductor Manufacturing International Corp. (981 HK), China’s biggest chipmaker, jumped 6.7 cents, or 43 percent, to HK$0.22. The company agreed to sell a 16.6 percent stake to Datang Telecom Technology & Industry Holdings Co. for $171.8 million, or 36 Hong Kong cents a share.