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By Bloomberg

Chinese stocks declined in Hong Kong, led by energy companies and banks, after a factory gauge fell to a seven-month low in December.

PetroChina Co. dropped 2.4 percent and China Shenhua Energy Co. slid 2.2 percent after crude oil retreated to a five-year low. Bank of China Ltd. slumped 1.5 percent. The preliminary Purchasing Managers’ Index from HSBC Holdings Plc and Markit Economics was at 49.5, missing the median estimate of 49.8 in a Bloomberg survey and lower than last month’s 50.0. Numbers below 50 indicate contraction. Citic Securities Co. jumped 9.9 percent to lead gains in Shanghai.

Hong Kong’s Hang Seng China Enterprises Index fell 1.2 percent to 11,074.74 at 10:12 a.m. local time, heading for its lowest close since Dec. 3. The gauge has retreated 6.7 percent from this year’s high on Dec. 8 as crude tumbled. Today’s reading suggests a downturn deepened in December even after efforts by the central bank to ease monetary conditions, including with a cut to benchmark interest rates last month.

“The economy is still lackluster but the market is expecting the government to come up with supporting measures,” said Wei Wei, an analyst at West China Securities Co. in Shanghai.

The Shanghai Composite Index climbed 0.9 percent to 2,978.60, even as more than two shares dropped for each that rose. The CSI 300 Index rose 1.1 percent as a gauge of financial shares surged 3.6 percent, led by brokerages. The Hang Seng Index lost 1 percent. The Bloomberg China-US Equity Index retreated 0.6 percent in New York.

The premium on mainland shares versus those in Hong Kong increased to 18 percent, the most since June 2012. The Shanghai index has jumped 20 percent in the past month, compared with a 3 percent advance by the Hang Seng China Enterprises gauge.

Valuation Gap

“There is room for H-shares to outperform in the short- term,” Nader Naeimi, who helps manage about $125 billion as Sydney-based head of dynamic asset allocation at AMP Capital Investors, said by phone on Dec. 12. “The valuation gap is getting compelling.”

Seven companies including Guosen Securities Co. will start marketing initial public offering shares this week and five will do so next week. The IPOs may freeze about 3 trillion yuan ($484.4 billion), according to Information Times.

Investors bought 76.6 billion yuan of shares using margin debt on the Shanghai bourse yesterday, taking the outstanding value of stock purchases through borrowed money to a record 628.7 billion yuan, according to data from the bourse.

West Texas Intermediate for January delivery declined $1.90, or 3.3 percent, to $55.91 a barrel in New York yesterday. It’s the lowest settlement since May 2009. The Organization of Petroleum Exporting Countries will refrain from curbing output even if prices fall as low as $40 a barrel, U.A.E. Energy Minister Suhail Al-Mazrouei said.

The Shanghai Composite is valued at 11 times 12-month projected earnings, according to data compiled by Bloomberg.