Economy faces risks: HKMA

Hong Kong's economy is facing increasing "downward" risks, Norman Chan, chief executive of the Hong Kong Monetary Authority (HKMA), the city's de facto central bank, said on Thursday.

Meanwhile, banks are expected to face "upward" pressure on interest rates, Chan said at the city's Legislative Council.

Meanwhile, Eddie Yue, deputy chief executive of the HKMA, told the legislators that the Hong Kong Exchange Fund posted a loss of HK$40.8 billion in the third quarter.

HKEx to introduce volatility futures

Hong Kong Exchanges and Clearing Limited (HKEx) said Thursday it will introduce trading of HSI Volatility Index (VHSI) Futures on Feb 20, 2012.

The VHSI, which is compiled by Hang Seng Indexes Company Limited, measures the expected volatility of Hang Seng Index (HSI) over the next 30 days implied by HSI options prices. The VHSI is calculated based on the Chicago Board of Options Exchange's Volatility Index (VIX) methodology with modifications, taking into account the trading characteristics of the HSI options market.

Watson to have 10,000 stores

Hutchison Whampoa Ltd's A.S. Watson unit expects to expand its retail network to 10,000 stores globally by year-end, it said in an e-mailed statement on Thursday. A.S. Watson is opening three new stores a day on average this year, the statement said.

A.S. Watson plans to expand its retail network in China to 3,000 by 2016, after opening its 1,000th store in Shanghai last week, according to the statement.

Stocks cap loss streak on Europe

Hong Kong stocks fell for a sixth day on Thursday after rising financing costs in Italy renewed concern Europe will fail to contain its debt crisis, and as data showed China manufacturing may contract for a second month.

The Hang Seng Index (HSI) declined 1.78 percent to 18026.84, its longest losing streak since Aug 9. The volume of stocks traded was 18 percent lower than the average over the past 100 sessions, according to data compiled by Bloomberg. All but six companies in the 48-member gauge slid.

The Hang Seng China Enterprises Index sank 2.12 percent to 9678.86 as preliminary results from a survey by HSBC Holdings Plc and Markit Economics showed the nation's manufacturing may contract for a second month in December. The reading of 49 for the purchasing managers' index compares with a final number of 47.7 for November. The dividing line between contraction and expansion is 50.

The HSI tumbled 22 percent this year through Wednesday as Europe's debt crisis damped investor confidence in a global economic recovery. Companies in the gauge traded at 9.8 times forecast earnings, down from 14.4 times on Dec 31, according to data compiled by Bloomberg. The Standard & Poor's 500 Index trades at 12.2 times.

Esprit fell 2.1 percent to HK$10.48, while Cosco Pacific Ltd sank 1.9 percent to HK$8.90.

Futures on the S&P 500 rose 0.4 percent on Thursday. The index dropped 1.1 percent in New York on Wednesday after Italy sold five- year notes yielding 6.47 percent, the highest since May 1997.

Energy companies and materials producers dropped the most among the Hang Seng Composite Index's 11 industry groups after oil and metal prices declined. Cnooc slid 4.6 percent to HK$13.82, while Jiangxi Copper Co retreated 3.9 percent to HK$16.46.

Futures on the HSI fell 1.6 percent to 17960. The HSI Volatility Index increased 2.4 percent to 28.62.

Bloomberg - Reuters

(HK Edition 12/16/2011 page2)