Hong Kong stocks unsettled by Macau’s June revenue miss

Hong Kong stocks fell for a second day yesterday, but managed to recover by the close on Monday, as casinos led declines after gaming revenue in Macau disappointed last month.

The Hang Seng Index slipped 0.1 percent to 25,734.77 as of 10:11 a.m. local time. Galaxy Entertainment Group Ltd. headed for its biggest drop since May, while Sands China Ltd. was set for its lowest close in three weeks. BOC Hong Kong (Holdings) Ltd. extended last week’s rally after saying it is studying a special dividend following the sale of Chiyu Bank. The Shanghai Composite Index slipped 0.3 percent, retreating from its highest level in more than two months, with large-cap shares bearing the brunt of the losses.

By the late afternoon, the Hang Seng Index had recovered to be up 0.1 percent, helped by a surge in Geely Automobile Holdings Ltd.

The Hong Kong benchmark has struggled to climb over the 26,000 level after a six-month rally lifted valuations. Macau’s casino revenue growth missed estimates in June as Chinese President Xi Jinping’s visit to Hong Kong last week likely curtailed visits to the gambling hub, analysts said after the figures were published on Saturday.

A gauge of Chinese manufacturing compiled by Caixin Media and Markit Economics unexpectedly rose to 50.4, indicating expansion, after an official measure released last Friday beat all estimates.

China’s bond-connect program with Hong Kong, which gives offshore investors another way to access the mainland’s debt market, started yesterday. Officials from Hong Kong’s Securities & Futures Commission visited a number of brokerages after a rout in small-cap stocks last week, scrutinizing trading records and margin loans, Apple Daily reported, citing unidentified people.

Meanwhile, China’s large-cap stocks were poised to fall for a second day as a technical indicator signaled recent gains were overdone. Insurance companies led the retreat.

The SSE 50 Index of some of China’s largest companies dropped 0.6 percent as of the midday break. New China Life Insurance Co. slid 2.5 percent to lead the drop, while China Pacific Insurance Group Co. and Ping An Insurance (Group) Co. also fell.

China’s large-cap companies have outperformed the broader market this year as a deleveraging campaign punished smaller firms with higher borrowing costs and state-backed funds were suspected of favoring stocks with heavy index weightings. The SSE 50’s 14-day relative-strength index last week climbed near the 70 level that signals to some traders an asset is overbought (more on page 11). MDT/Bloomberg