Hong Kong Stocks Drop, Paring Best Two-Week Gain in Year

Hong Kong stocks fell, with the benchmark index paring its biggest two-week gain in a year, as property developers and materials shares led declines.

China Coal Energy Co., the country's second-largest producer of the fuel, sank 3.1 percent after the government said it will cut coal consumption. Sun Hung Kai Properties Ltd. (16), the world's second-biggest developer, fell 1.4 percent after trimming its sales target. Gold producers led materials companies lower as the precious metal headed for its steepest weekly loss since June amid expectations the U.S. Federal Open Market Committee will next week decide to reduce stimulus.

The Hang Seng Index slid 0.2 percent to close at 22,915.28 in Hong Kong, paring its advance since Aug. 30 to 5.5 percent. About three stocks retreated for every two that gained. The Hang Seng China Enterprises Index (HSCEI), also known as the H-share index, declined 0.9 percent to 10,538.94.

"The market had big gains in the short term, and the FOMC meeting is coming up so it's reasonable to have some profit-taking," said Linus Yip, a strategist at First Shanghai Securities in Hong Kong. "Global recovery is the major story right now. Overall the upward trend is intact."

The H-share index entered a bull market this week after rebounding more than 20 percent from a June low, while the Hang Seng Index (HSI) erased its 2013 loss. Stocks climbed as data showed China's inflation remained subdued in August, while export growth, factory output and retail sales beat expectations. Hong Kong's equity benchmark traded at 10.9 times estimated earnings, compared with a multiple of 15.2 for the Standard & Poor's 500 Index.

Growth Targets

Bank of America Merrill Lynch boosted its economic growth estimate for China this year to 7.7 percent from 7.6 percent, joining Goldman Sachs Group Inc., JPMorgan Chase & Co. and Deutsche Bank AG in raising predictions for expansion in the world's second-biggest economy. The government has defended its target for 7.5 percent annual growth.

China's State Council yesterday said it will reduce coal consumption in an effort to "gradually eliminate" heavily polluted days in as soon as a decade. A rebound in coal prices in China is being limited by overcapacity, Goldman Sachs Group Inc. analyst Julian Zhu said yesterday.

China Coal slid 3.1 percent to HK$5.06. China Shenhua Energy Co. (1088), the nation's top coal miner by market value, retreated 3.3 percent to HK$25.15.

Stimulus Concern

Futures on the S&P 500 were little changed today. The gauge dropped yesterday amid growing concern over Syria and as investors weighed the prospects for Federal Reserve stimulus cuts. The Fed will decide to cut its $85 billion in monthly bond purchases by $10 billion when it meets Sept. 17-18, according to 65 percent of economists surveyed by Bloomberg last month.

U.S. Secretary of State John Kerry is in Geneva discussing a deal with Russia for the removal of Syria's chemical weapons. Syrian President Bashar al-Assad said any deal to surrender the nation's chemical arsenal must be a "two-way street" in which the administration of President Barack Obama drops its military threats and stops arming Syrian rebels.

Gold producers declined as the price of the metal headed for its first annual loss in 13 years as it loses appeal as a haven asset. Zijin Mining Group Co. retreated 1.6 percent to HK$1.82. Zhaojin Mining Industry Co. (1818), the mainland's No. 2 gold producer, plunged 4.7 percent to HK$6.44.

A measure of property companies dropped the most among the Hang Seng Index's industry groups. Sun Hung Kai slid 1.4 percent to HK$101.70 after cutting its net-income forecast and reporting full-year underlying profit that missed estimates.

Sun Hung Kai

Sun Hung Kai plans to sell HK$28 billion ($3.6 billion) of homes in Hong Kong and mainland China in the year through June 2014, Deputy Managing Director Victor Lui said yesterday. That compares with sales of HK$32.9 billion a year earlier.

Among stocks that climbed, Sino Biopharmaceutical Ltd. (1177) gained 3.4 percent to HK$4.92 after saying it's investigating media reports of alleged bribery at its unit. The drugmaker said neither senior management nor board members of the group were involved. The shares yesterday plunged the most since 2000.

Futures on the Hong Kong gauge fell 0.2 percent to 22,933. The HSI Volatility Index climbed 0.1 percent to 16.71, indicating traders expect the benchmark equity index to swing 4.8 percent in the next 30 days.