July 29 (Bloomberg) -- Hong Kong stocks dropped, led by banks and exporters, after the U.S. Congress delayed a vote on a plan to raise its borrowing limit, pushing the world's biggest economy to the brink of defaulting on its sovereign debt.

Li & Fung Ltd., the largest supplier of toys and clothes to retailers including Target Corp. and Wal-Mart Stores Inc., sank 5.5 percent. HSBC Holdings Plc, a lender that gets more than 20 percent of revenue from North America, declined 1 percent. China Petroleum & Chemical Corp. fell 1 percent as oil prices headed toward a weekly decline. AIA Group Ltd., an insurer, gained 3.4 percent after reporting a stronger-than-expected increase in first-half profit.

The Hang Seng Index fell 0.6 percent to 22,440.25 at the 4 p.m. close of trading in Hong Kong, paring its monthly advance to 0.2 percent. About three times as many stocks declined as advanced. The gauge's losses deepened today after chief U.S. House of Representatives vote counter Kevin McCarthy said there would be no vote on Speaker John Boehner's debt-limit plan Thursday night.

"It's unbelievable, these guys are not just playing with financial markets but their own constituents' jobs," said Sydney-based Shane Oliver, head of investment strategy at AMP Capital Investors Ltd., which has almost $100 billion under management. "It's certainly adding to stock-market nervousness. I think they will eventually get a deal that avoids massive spending cuts or default, but the risk is growing that they won't."

Debt Wrangle

The Hang Seng China Enterprises Index, which tracks so- called H shares of Chinese companies, dropped 1.2 percent to 12,373.64. The Hang Seng surged 2.6 percent last week, the steepest gain among Asian benchmark indexes, as European leaders took more steps toward easing that region's sovereign debt crisis, including providing fresh aid for Greece.

Stocks fell today as Republicans and Democrats continued their wrangling over the debt ceiling. Obama administration officials will brief the public on priorities for paying the nation's bills if the U.S. debt limit isn't raised, a Democratic Party official said in an e-mail yesterday.

Treasury Secretary Timothy F. Geithner has repeatedly said the government's authority to borrow will run out on Aug. 2 unless Congress raises the $14.3 trillion debt ceiling.

Futures on the Standard & Poor's 500 Index dropped 0.3 percent today, indicating U.S. stocks will open lower.

Separately, Spain's Aa2 ratings were today placed by Moody's Investors Service on review for a possible downgrade.

Banks Drop

Esprit Holdings Ltd., a global fashion retailer that gets more than 80 percent of its revenue from Europe, fell 1.5 percent to HK$22.70.

Li & Fung dropped 5.5 percent to HK$12.96. Aluminum Corp. of China Ltd., the listed unit of the nation's biggest maker of the lightweight metal, slumped 1 percent to HK$6.67. Cathay Pacific Airways Ltd., Hong Kong's largest carrier, lost 1.7 percent to HK$18.06.

HSBC declined 1 percent to HK$76.55. Bank of China Ltd. slipped 1.4 percent to HK$3.59.

"Markets have been forced to seriously contemplate the unthinkable, a U.S debt default," said Tim Schroeders, who helps manage $1 billion in global equities at Pengana Capital Ltd. in Melbourne. Stock markets have "continued to push lower as nervousness amongst investors intensifies."

China Petroleum slid 1 percent to HK$7.69. PetroChina Co., the nation's largest oil company, fell 1.4 percent to HK$11.04 and Cnooc Ltd. lost 0.3 percent to HK$17.42.

Oil headed for the first weekly decline in five weeks on concern a failure to reach a deal on raising the debt limit may cause the U.S. to default, threatening the economy of the world's biggest crude consumer. Crude oil for September delivery fell as much as 0.8 percent today on the New York Mercantile Exchange.

Hang Lung Properties Ltd., a Hong Kong developer that focuses on building shopping malls in China, slumped 4.2 percent to HK$28.80, the lowest in more than a year, after saying full- year profit excluding gains from revaluations fell 59 percent on fewer home sales in the city.

Among the stocks that climbed today, AIA Group gained 3.4 percent to HK$28.65. The insurer posted first-half net income of $1.3 billion, beating the $1.09 billion average estimate in a Bloomberg survey of five analysts.

Developer Rises

Sun Hung Kai Properties Ltd. gained 0.8 percent to HK$118.60 after its Pacific Earth Enterprise Ltd. unit won a tender for a residential site in Hong Kong's Tung Chung district, according to Radio Television Hong Kong, which didn't say where it got the information.

Futures on the Hang Seng retreated 1.2 percent. The HSI Volatility Index rose 9 percent to 21.43. The benchmark gauge for Hong Kong stock options indicates traders expect a swing of 6.1 percent in the Hang Seng Index in the next 30 days.

The Hang Seng index has retreated 2.6 percent this year, compared with a gain of 3.4 percent by the S&P 500 and a drop of 3.2 percent by the Stoxx Europe 600 Index. Stocks in the Hong Kong benchmark are valued at 12.1 times estimated earnings on average, compared with 13.1 times for the S&P 500 and 10.9 times for the Stoxx 600.