Hong Kong H-Shares Extend April Drop on Earnings; Tencent Slumps

Apr 30, 2014 4:50 am ET

April 30 (Bloomberg) -- Hong Kong stocks fell, with a gauge of Chinese companies extending its monthly drop, as investors weighed earnings. Tencent Holdings Ltd. led declines on the Hang Seng Index as Asian technology shares slid.

Aluminum Corporation of China Ltd., the nation’s biggest producer of the light metal, sank 4.5 percent after its first- quarter loss widened. Esprit Holdings Ltd. dropped the most in more than seven months after the clothier’s sales fell. Tencent lost 5.2 percent. China Huishan Dairy Holdings Co., backed by billionaire Cheng Yu-tung, jumped 6.7 percent after a 23 percent plunge the past four trading days.

The Hang Seng China Enterprises Index, also known as the H- share index, fell 1 percent to 9,779.72 at the close in Hong Kong, capping a 2.9 percent loss this month. The Hang Seng Index retreated 1.4 percent to 22,133.97, erasing its monthly gain to decline 0.1 percent in April. China releases its manufacturing Purchasing Managers’ Index tomorrow, when markets in the city and mainland will be shut for a holiday.

“When you talk about earnings, obviously top-line growth has been slowing,” said Khiem Do, Hong Kong-based head of Asian multi-asset strategy at Baring Asset Management Ltd. The PMI and other economic data “send the same message that the growth rate in China is slowing.”

The Hang Seng Index fell 5 percent this year while the H- share gauge lost 9.6 percent on growing concern China won’t meet its official 7.5 percent target for economic expansion. The Hang Seng Index traded at 10.2 times estimated earnings , compared with 16 for the Standard & Poor’s 500 Index yesterday.

Factory Data

Economists in a Bloomberg survey expect a report tomorrow will show China’s official manufacturing gauge rose to 50.5 in April from 50.3 in March. Preliminary factory data for April from HSBC Holdings Plc and Markit Economics last week signaled a fourth month of contraction. Readings below 50 indicate the sector is shrinking.

Futures on the S&P 500 fell 0.3 percent today. The gauge climbed 0.5 percent yesterday as Internet stocks rallied and results from Merck & Co. to Sprint Corp. topped estimates before a Federal Reserve decision on monetary policy. The central bank today will probably announce a fourth consecutive reduction to its monthly bond-buying program, according to economists polled by Bloomberg.

Tencent plunged 5.2 percent to HK$483.20 as Internet- related stocks in Asia dropped. Forgame Holdings Ltd., a maker of online games, declined 4.7 percent to HK$31.25. Web-portal operator Yahoo Japan Corp. lost 5.5 percent to 444 yen.

Earnings Season

Esprit plummeted 5.2 percent to HK$12.88, its biggest drop since Sept. 10. Third-quarter sales fell 9.9 percent from a year earlier to HK$6.05 billion ($967 million).

Aluminum Corporation of China fell 4.5 percent to HK$2.77. The company also known as Chalco posted a loss of 2.2 billion yuan in the three months ended March 31 from 975 million yuan in the year-earlier period as overcapacity caused prices to fall.

China Huishan Dairy soared 6.7 percent to HK$1.76, Its biggest rally since Oct. 3. An Yu Investments Ltd. and Spring Harvest Ltd., a unit of Swiss food company Hero Beteiligungen AG, sold stakes after participating in Huishan’s initial public offering, the company said in a statement. The sales are unrelated to its business operations, Huishan said.

Industrial & Commercial Bank of China Ltd. fell 1.1 percent to HK$4.62. First-quarter net income at the biggest mainland lender rose 6.6 percent to 73.3 billion yuan, the weakest profit growth in almost five years, compared with the 74.7 billion-yuan median estimate in a Bloomberg survey. The bank said it will buy Turkey’s Tekstil Bankasi AS as it seeks to expand overseas to counter a mainland credit slowdown.

IPO Scrapped

WH Group Ltd., the world’s biggest pork producer, canceled a $1.9 billion Hong Kong public offering as executives refused to sell shares at the low end of the marketed range, people familiar with the matter said. The company scrapped what initially would have been the city’s biggest IPO in more than three years and said it will return investors’ money.

Trading volume on the Hang Seng Index was 7.4 percent above the 30-day average, while futures on the gauge slumped 2.1 percent.