Hong Kong Stocks Fall on Earnings; Dongfeng Motor Declines

Aug. 25 (Bloomberg) -- Hong Kong stocks dropped after Aluminum Corp. of China Ltd. reported its third quarterly net loss and Dongfeng Motor Group Co. didn’t propose a dividend when it announced earnings today. Aluminum Corp., China’s biggest aluminum maker also known as Chalco, dropped 1.9 percent. Dongfeng Motor, China’s third- largest automaker, declined 5.2 percent. Shares of Chinese banks declined after China Construction Bank Corp. Chairman Guo Shuqing said excess cash in the banking system has led to asset bubbles. Bank of East Asia Ltd., Hong Kong’s third-biggest lender, climbed 1.8 percent after posting first-half earnings that beat estimates. “There are very legitimate concerns that governments are now pushing on the end of the string,” Hugh Young, who helps oversee the equivalent of $220 billion as Aberdeen Asset Management’s Asian managing director, told Bloomberg Television. “One of the side effects of that is we’re seeing this money spill out into financial markets and driving prices higher.” The Hang Seng Index lost 0.5 percent to 20,435.24 at the close. The gauge has soared 80 percent from a four-month low on March 9, amid speculation stimulus efforts worldwide, including 4 trillion yuan ($585 billion) of spending in China, will revive global growth. The Hang Seng China Enterprises Index, which tracks so- called H shares of Chinese companies, fell 0.4 percent to 11,654.81. Chalco, Dongfeng Motor Chalco dropped 1.9 percent to HK$9.04. The company posted a net loss of 1.6 billion yuan ($234 million) in the quarter ended June 30 as the global recession drove down prices and demand for the metal used in packaging and cars plunged. Dongfeng Motor Group Co. Ltd., China’s third-largest automaker, fell 5.2 percent to HK$8.60. The company said rising competition is eroding margins and the positive impact of government stimulus measures on car demand is diminishing. Dongfeng did not announce a dividend when it reported that first-half profit rose 5 percent as a government stimulus program spurred demand for cars. Sinotruk (Hong Kong) Ltd., China’s biggest heavy-truck maker, dropped 4 percent to HK$8.83. The company said first-half profit declined 40 percent to 462 million yuan after the recession damped exports and rising competition squeezed margins. Want Want China Holdings Ltd., the country’s biggest maker of rice crackers and flavored milk, slumped 5.9 percent to HK$4.30. The company said first-half profit fell 6.4 percent to $121 million from a year ago. Trading Suspension Times Ltd. was suspended from trading in Hong Kong after its shares climbed 12 percent to HK$4.19 in the morning session. The company did not provide a reason for the suspension. Chinese entrepreneur Kenneth Fang and his family are selling the company and hope to raise more than $560 million, the Wall Street Journal reported, citing people familiar with the matter. The Fang family owns 72.3 percent of Times, which operates 28 hypermarkets and 15 supermarkets in China’s coastal Jiangsu province. Bidders are expected to include Chinese rival chains Wumart Stores Inc. and Lianhua Supermarket Holdings Co., the newspaper reported. Bank of East Asia gained 1.8 percent to HK$26. The lender said first-half profit rose 49 percent to HK$1.17 billion ($151 million) from a year ago. That compared with the HK$1 billion median estimate of seven analysts surveyed by Bloomberg. ‘Bubbles in the Market’ Comments from China Construction Bank’s chairman dragged shares of mainland banks lower. “There are uncertainties in the economy and bubbles in the capital market,” Chairman Guo told reporters in Beijing yesterday. “China’s banking system still has excessive liquidity.” Bank of China Ltd., the nation’s third-largest commercial lender, dropped 1.3 percent to HK$3.82. China Construction Bank, the nation’s second-largest lender, slipped 0.5 percent to HK$5.96. Industrial & Commercial Bank of China Ltd., the country’s biggest lender also known as ICBC, lost 0.2 percent to HK$5.28. Aberdeen’s Young said investors should avoid Chinese banks as the rapid growth in lending in the past six months is worrying. “When you expand your loan book by 30 to 40 percent in a span of six months, the corollary of that is you will have non- performing loans,” Young said. Chinese banks handed out a record $1.1 trillion of new loans in the first half to support the nation’s $585 billion economic stimulus package. Chinese stocks briefly entered a so- called bear market last week on concern the government would curb new loans to reduce speculation in stocks and real estate. ICBC and China Construction bank posted earnings that beat estimates last week.