Hong Kong Stocks Fall as Commodity Prices Drop; Developers Slip

Feb. 10 （Bloomberg） -- Hong Kong stocks fell, sending the Hang Seng Index toward its lowest close in six weeks, as commodity producers slipped on lower oil prices, and Chinese banks and developers declined on concern higher interest rates will slow economic growth.

PetroChina Co., the nation’s largest oil producer, dropped 2.1 percent, and Aluminum Corp. of China Ltd., the country’s No. 1 producer of the metal, sank 1.7 percent after oil and metal prices fell. China Overseas Land & Investment Ltd., controlled by the nation’s construction ministry, dropped 2 percent after China raised interest rates on Feb. 8 to curb inflation. Li & Fung Ltd., the biggest supplier to Wal-Mart Stores Inc., lost 1.2 percent after Federal Reserve Chairman Ben S. Bernanke said the U.S. unemployment rate is likely to remain high.

The Hang Seng Index fell 0.7 percent to 22,994.94 at the midday-trading break, headed for its lowest close since Dec. 29. All but nine stocks declined. The Hang Seng China Enterprises Index of so-called H shares of Chinese companies slid 1.3 percent to 12,121.07.

“Fund managers are continuing to move their money from stocks to cash,” said Castor Pang, Hong Kong-based research director at Cinda International Holdings Ltd. Inflation in China and tightening concerns will weigh on the consumer industry, as well as China’s property and financial stocks, driving down the Hang Seng Index, he said.

PetroChina, the nation’s largest oil producer, sank 2.1 percent to HK$10.32. Aluminum Corp. of China lost 1.7 percent to HK$7.40, while Jiangxi Copper Co., China’s No. 1 producer of the metal, dropped 1.4 percent to HK$24.45.

Crude Oil

Crude oil for March delivery slipped 0.3 percent to $86.71 a barrel in New York yesterday, the lowest settlement price since Jan. 27. The London Metal Exchange Index of prices for six industrial metals including copper and aluminum dropped 1.2 percent yesterday, the sharpest retreat in two weeks.

Li & Fung declined 1.2 percent to HK$46.40. Yue Yuen Industrial Holdings Ltd., which makes shoes for Nike Inc., sank 1.7 percent to HK$26, while Techtronic Industries Co., maker of Hoover vacuum cleaners and Ryobi power tools that got 76 percent of its fiscal 2009 revenue from North America, retreated 2 percent to HK$9.88.

Futures on the Standard & Poor’s 500 Index were little changed today. The index dropped 0.3 percent yesterday in New York amid growing investor concern that accelerating global inflation will lead to higher borrowing costs.

U.S. Jobs

Federal Chairman Bernanke said the U.S. unemployment rate is likely to remain high “for some time” even after the biggest two-month drop in the jobless rate since 1958.

The Hang Seng Index has risen 0.6 percent this year to yesterday as global economic reports and corporate earnings outlook boosted investor confidence. Shares in the gauge traded at an average 12.5 times estimated earnings at the previous close, compared with about 17.2 times at the start of 2010.

Chinese developers and banks extended yesterday’s drop after the People’s Bank of China on Feb. 8 raised the one-year lending rate by a quarter point to 6.06 percent and the one-year deposit rate an equivalent amount to 3 percent.

China Overseas Land dropped 2 percent to HK$13.64, and China Resources Land Ltd., a state-controlled developer, slipped 2.5 percent to HK$13.02. China Construction Bank Corp., the country’s second-biggest lender by market value, fell 1.3 percent to HK$6.62, and Agricultural Bank of China Ltd., the nation’s largest lender to farmers, declined 1.9 percent to HK$3.64. China Resources Enterprise Ltd., a government-backed retailer, slid 1.6 percent to HK$27.50.

Futures on the Hang Seng Index dropped 0.4 percent to 22,980.