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HONG Kong stocks fell for the second day in three yesterday, led by Li & Fung Ltd, on speculation that recent gains were excessive.
Li & Fung, the supplier of clothes, toys and home furniture to Wal-Mart Stores Inc, tumbled the most in five weeks from a five-month high. According to Bloomberg News, Alibaba.com Ltd dropped after Microsoft Corp withdrew its offer to buy Yahoo! Inc.
Li & Fung's "share price is not cheap," said Ben Kwong, head of research at KGI Asia Ltd in Hong Kong.
Cheung Kong (Holdings) Ltd, Hong Kong billionaire Li Ka-shing's flagship property developer, and Sun Hung Kai Properties Ltd climbed to three-month highs as investors bet cheap lending will spur demand for their homes. Oil producers advanced after crude climbed.
The Hang Seng Index fell 57.07, or 0.2 percent, to 26,183.95 at the close of trading. Twenty shares gained, while 18 fell and five were unchanged. The measure, which earlier rose as much as 0.6 percent, advanced 1.9 percent on Friday.
The gauge climbed 13 percent in April, capping a 22-percent advance from a seven-month low on March 17, on speculation that the worst of the global credit squeeze is over. Stocks of Chinese mainland companies have also rebounded as higher earnings countered concern that government measures to quell inflation will hurt profits. The benchmark is still down 5.9 percent this year.
Relative strength
The Hang Seng China Enterprises Index, which tracks so-called H shares of Chinese mainland companies, decreased less than 0.1 percent to 14,625.28. Li & Fung dropped HK$2.25 (29 US cents), or 6.8 percent, to HK$31.10, the largest decliner on the Hang Seng Index. The company's relative strength index reached 71 on May 2. Readings above 70 suggest to some investors that the stock is set to decline.
The stock is expected to "fall to HK$28, where it will find some support," KGI's Kwong said.
Li & Fung rose 24 percent in the 12 trading days before yesterday.
Alibaba.com, China's biggest online commerce company, fell 96 cents, or 5.9 percent, to HK$15.24. Its parent is 39 percent-owned by Yahoo!. Microsoft said on Saturday that it had abandoned its bid for Yahoo! after failing to agree on a price.
"Microsoft's bid to buy Yahoo! had been positive for Internet companies in general, so the withdrawal of the offer may be negative in the short term," said Linus Yip, a strategist at First Shanghai Securities in Hong Kong.
Cheung Kong climbed HK$2.20, or 1.8 percent, to HK$126.70, its highest level since January 29.
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