Hong Kong stocks fell on Thursday, with the Hang Seng Index (HSI) slumping the most in three months, after HSBC Holdings Plc said investment banking profit fell amid concern Europe's debt crisis won't be contained.

The HSI retreated 5.25 percent to 18963.89 at the close, the biggest drop since August 9, when the measure entered a so-called bear market amid concern Europe's debt crisis and US economic slowdown will stall a global recovery.

The index exited the bear market on October 27. Companies in the gauge trade at 10.3 times estimated earnings, down from 14.4 times on December 31, according to Bloomberg data. The Hang Seng China Enterprises Index tumbled 5.66 percent to 10300.18.

The HSI Volatility Index jumped 21 percent to 38.18, its highest close in a week. Futures on the HSI that expire this month fell 4.5 percent to 19033.

Hong Kong's property market is "cooling," K.C. Chan, the acting financial secretary, said in a transcript on the government's website on Thursday. Inflation in China isn't moderating fast enough to justify an "immediate and meaningful" monetary easing, Credit Suisse Group AG said in a research report on Thursday.

Economic data Wednesday showed mainland consumer prices rose 5.5 percent in October from a year ago, compared with 6.1 percent the previous month.

New World Development Co sank 8 percent to HK$7.23. Hang Lung Properties Ltd lost 7.1 percent to HK$26.05. Sun Hung Kai Properties Ltd retreated 5.7 percent to HK$100.90.

China's housing transactions fell in October for the first time in three months, declining 25 percent from September as Beijing intensified efforts to curb rising residential prices. The value of homes sold last month dropped to 372.3 billion yuan ($58.7 billion) from 493.9 billion yuan in September, based on November 9 data from the statistics bureau.

HSBC fell 9.1 percent to HK$61.70, the biggest decline in the HSI. The lender has so far set aside more than $65 billion for souring loans in North America after its purchase of US subprime lender Household International in 2003.

ICBC retreated 8.7 percent to HK$4.74. Goldman Sachs sold 1.75 billion of the bank's shares at HK$4.88 (63 cents) each, two people with knowledge of the matter said, asking not to be identified because the details are private. New York-based Goldman trimmed its stake after the stock posted its biggest monthly rally in 2-1/2 years.

Shares tied to Europe sank after Italy's 10-year bond yield surged to a euro-era high of 7.25 percent as Prime Minister Silvio Berlusconi's pledge to step down failed to convince investors the country can slash Europe's second-largest debt burden.

Esprit Holdings Ltd retreated 7.8 percent to HK$9.50, while Cosco Pacific Ltd tumbled 7.3 percent to HK$9.13.

Spanish 10-year government bonds declined on Thursday, increasing the additional yield investors receive for holding the securities instead of benchmark German bunds to the most since before the euro was adopted in 1999.

Bloomberg

(HK Edition 11/11/2011 page2)