Hong Kong shares post biggest loss in six months, China slides
HONG KONG, May 16 – The Hang Seng index posted its biggest loss in six months today after mainland media reported flat loan growth for the country’s “Big Four” state-owned banks in the first two weeks of May, fanning fears about the slowing Chinese economy.
Those concerns combined with Greece’s failure to form a government and a three-day losing streak on Wall Street kept investors wary and Asian markets firmly in “risk off” mode.
Chinese shares also slipped, but did relatively better as investors remained convinced the signs of weakness in the economy may prompt further policy action, after a cut in reserve requirements over the weekend.
“I think there is an expectation in China for more drastic policy action by Beijing, which is why markets in the mainland are holding out better than in Hong Kong,” said Hong Hao, chief strategist at Bank of Communications International.
Hong Kong’s sell-off marked the highest bourse turnover in two weeks, but there was no panic. Investors were mostly adjusting positions after they were wrong-footed by yesterday’s short-covering rally on hopes that markets may have stabilised, traders said.
The Hang Seng Index ended down 3.2 per cent at 19,259.83, the lowest close since Jan. 16 and its biggest drop in a day since Nov. 10, when it had slumped 5.2 per cent.
The benchmark broke below its 200-day moving average, currently at 19,831, which is likely to become a significant level for the benchmark with a possible break on either side setting the direction for the market.
In the mainland Chinese markets, the CSI300 Index lost 1.6 per cent, while the Shanghai Composite Index fell 1.2 per cent.
Hopes of Hong Kong’s long streak of losses ending were dashed after Shanghai Securities News reported new lending by China’s four biggest state-owned banks was flat in the first two weeks of May.
One trader at an Asian brokerage in Hong Kong said some European funds had covered short bets and even gone long overnight but exited quickly after the Hang Seng Index opened much weaker than other regional markets.
Chinese financials and other sectors tied to the economy were among the worst hit. Europe’s largest bank, HSBC Holdings , which has the biggest weighting in the Hang Seng Index, lost 2.4 per cent.
Shares of China’s lenders suffered, with smaller names hit by heavier losses. China Minsheng Bank slumped 6.2 per cent in Hong Kong and 1.8 per cent in Shanghai.
The country’s second-largest lender, China Construction Bank (CCB) fell 2.8 per cent in Hong Kong and 1.7 per cent in Shanghai.
Growth-sensitive sectors were also hard hit. Chinese oil major PetroChina fell 3.8 per cent in Hong Kong and 0.8 per cent in Shanghai.
New China Life Insurance was hammered 8.2 per cent in Hong Kong in almost five times its 30-day average volume after it failed to win inclusion as an MSCI China component, as many investors had expected.
Several other deletions from the MSCI China benchmark also underperformed. China Dongxiang lost 3.1 per cent, while China Molybdenum fell 4.8 per cent.
2012 outperformers were among the top percentage losers.
Chinese internet giant Tencent Holdings slid 4.5 per cent ahead of its quarterly earnings later in the day. It is still up 40 per cent this year, compared to 4.8 per cent gain for the Hang Seng Index.
Tencent is currently trading at 24.4 times forward 12-month earnings, a 12 per cent discount from its historical median, according to Thomson Reuters StarMine. – Reuters