Hong Kong Stocks Drop a Sixth Day on Inflation Concerns; Sands China Falls

Hong Kong stocks fell for a sixth day, the longest stretch of losses since August, on speculation China will further tighten monetary policy to tame inflation.
Sands China Ltd. (1928), Asia's No. 1 casino company by market value, dropped 2.9 percent after earnings by its Las Vegas-based parent missed analysts' estimates. Citic Resources Holdings Ltd. fell 9.1 percent, the biggest loss in the Hang Seng Composite Index, after the oil and coal producer said it plans to raise HK$2.5 billion ($322 million) by selling shares.
"You've got a slower-than-expected economy coupled with the stickiness of higher inflation, so people in the market are probably going to wait and see before the next consumer price index numbers come out," said Michael Liang, chief investment officer at Foundation Asset Management (HK) Ltd., which oversees $120 million. "People may be edgy that the CPI is going to hit a new high."
The Hang Seng Index dropped 1.3 percent to 23,335.65 as of the midday trading break in Hong Kong, the biggest loss based on closing prices since April 19. All but one stock in the index declined. The Hang Seng China Enterprises Index of Chinese companies' H-shares fell 1.6 percent to 12,899.71, set for its lowest close since March 28.
China may raise banks' reserve requirement ratios this month as new yuan positions at Chinese banks accumulated from sales of foreign exchange to the central bank may remain high, the China Securities Journal reported, citing unidentified people.
Inflation Expectations
"Stabilizing prices and managing inflation expectations are critical," the People's Bank of China said in a first- quarter monetary policy report published yesterday. Bank reserve requirements have no "absolute ceiling," the report said, restating Governor Zhou Xiaochuan's comment on April 16.
Futures on the Hang Seng Index (HSI) dropped 1 percent to 23,169. The HSI Volatility Index, the benchmark gauge for Hong Kong stock options, slid 1.7 percent to 17.71, indicating options traders expect a swing of 5.1 percent in the Hang Seng in the next 30 days.
Sands China retreated 2.9 percent to HK$21.75. Billionaire Sheldon Adelson's Las Vegas Sands Corp. yesterday said first- quarter profit excluding items was 37 cents a share, less than the 44-cent average estimate of 22 analysts in a Bloomberg survey.
Citic Resources fell 9.1 percent to HK$1.69. The Chinese metal producer-turned-energy supplier plans to issue 1.82 billion rights shares at HK$1.38 apiece on the basis of three rights shares for every 10 existing shares held, according to a statement to Hong Kong stock exchange.
China Electricity Generators
China Unicom (Hong Kong) Ltd. slumped 3.3 percent to HK$15.36. The nation's second-largest mobile-phone company was cut to "underperform" from "neutral" by analysts at Macquarie Group Ltd.
Datang International Power Generation Co. rose 2.8 percent to HK$2.94. Dongfang Electric Corp. advanced 4 percent to HK$27.65. China Power International Development Ltd. climbed 2.2 percent to HK$1.87.
The China Electricity Council has asked the government to "appropriately" increase power prices to avoid supply shortfalls, the Shanghai Securities News reported today, citing unidentified people at the industry body. China's utility stocks were raised to "neutral" from "underweight" at Goldman Sachs Group Inc. on the prospect the government may introduce policies to help the nation's power producers.