Hong Kong Stocks Fall as Casinos Slump After Crown Detentions

(Bloomberg) -- Hong Kong stocks extended last week’s slump as casino operators declined after Chinese authorities detained employees from billionaire James Packer’s Crown Resorts Ltd., while property developers paced losses by financial shares.

The Hang Seng Index fell 0.8 percent at the close, after dropping 2.6 percent last week. Sands China Ltd. and Galaxy Entertainment Group Ltd. retreated as the detentions, which include the head of Crown’s VIP International team, highlight the industry’s vulnerability to Chinese crackdowns. A gauge of real estate companies closed at its lowest since Aug. 4. A measure of U.S. dollar-denominated shares traded in Shanghai tumbled the most in nine months.

Hong Kong’s benchmark equity index has fallen in October, after a 12 percent jump in the third quarter, as China’s exports disappointed, a raft of cities imposed restrictions to cool the property market and traders boosted bets on higher U.S. borrowing costs. A flood of money from mainland funds into the city’s shares has also slowed to a trickle as valuations climbed to a five-year high. China will report data including gross domestic product and industrial output on Wednesday.

“The casino industry is in a sensitive position as recent Chinese government policy has been anti-corruption,” said Ronald Wan, chief executive of Partners Capital International Ltd. in Hong Kong. “The rate hike in December is unavoidable. Some people use that as an excuse to sell down the Hong Kong property sector.”

The Shanghai Stock Exchange B Share Index sank 6.2 percent, with Kama Co. and Shanghai Lingyun Industries Development Co. dropping by the day’s 10 percent limit. The benchmark Shanghai Composite Index slid 0.7 percent, after gaining 2 percent last week.

B shares were first issued in 1992 to give local companies a way to raise funds from foreign investors, who were banned from buying securities denominated in yuan. Foreigners and Chinese individuals are allowed to trade B shares. The Shanghai B-share index trades at 30.5 times reported earnings, almost double the 17.8 multiple for the Shanghai Composite Index.

The Hang Seng Index slid to 23,037.54, while the Hang Seng China Enterprises Index dropped 0.6 percent.

Casinos Slide

A measure of gambling companies lost 2.8 percent, retreating to its lowest level since early September. Galaxy Entertainment, Sands China and Wynn Macau Ltd. dropped at least 2.7 percent.

Crown said on Monday that Jason O’Connor, head of its VIP International team, is among those being questioned. China’s foreign ministry said Australians were detained for suspected involvement in gambling crimes, the Australian Financial Review reported. The detention comes after Premier Li Keqiang reiterated during his visit to Macau last week the government’s push for the city to diversify its economy.

A measure of property firms listed in Hong Kong slipped 0.7 percent. Sino Land Co. retreated 2.1 percent, while Cheung Kong Property Holdings Ltd. lost 1.4 percent.

Federal Reserve Chair Janet Yellen signaled Friday that the central bank will remain deliberate in raising interest rates as the odds for monetary tightening in December hovered above 60 percent. With Hong Kong’s currency pegged to the dollar, rates in the city track those in the U.S.

Birmingham International Holdings Ltd. tumbled 51 percent as it resumed trading after being suspended since December 2014. The company named Zhao Wenqing its new chief executive officer.

To contact the reporter on this story: Kana Nishizawa in Hong Kong at knishizawa5@bloomberg.net. To contact the editors responsible for this story: Richard Frost at rfrost4@bloomberg.net, Philip Glamann, Phani Varahabhotla

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