Hong Kong’s benchmark stock index tumbled the most in three months amid concerns over slumping Chinese property prices, higher money-market rates and political tension between the city and the mainland.
The Hang Seng Index (HSI) fell 1.7 percent to 22,804.81 at the close, the most since March 20. Sino Land Co. slid 3.9 percent. Bank of China Ltd. sank for a fourth day as the nation’s seven-day repurchase rate, a gauge of cash availability, rose to a seven-week high. Great Wall Motor Co. retreated after the automaker replaced some executives amid a sales slump.
While better-than-anticipated Chinese manufacturing data sparked early gains in stocks, the advance was wiped out amid investor speculation that falling property prices and tighter liquidity in the banking system will weigh on economic growth, said Huaxi Securities Co. The selloff was amplified by concern a democracy poll in Hong Kong may strain ties with the mainland, according to Asian Capital Holdings Ltd. and Ample Capital Ltd.
“Although the PMI was better than expected today, there’s not enough confidence in the market to push any gains further,” said Mao Sheng, an analyst at Huaxi Securities in Chengdu. “Property data are still weak.”
The Hang Seng China Enterprises Index, known as the H-shares gauge, slumped 1.9 percent. Shanghai Composite Index (SHCOMP) slipped 0.1 percent to 2,024.37, with a gauge of developers slumping 1 percent for the biggest loss among industry groups. The CSI 300 Index lost 0.1 percent.
The H-share gauge has lost 5.7 percent this year through last week on concern a weakening property market will hurt the economy and new stock sales will divert funds from existing shares. The index is valued at 6.9 times 12-month projected earnings, compared with 7.5 for the Shanghai index and 10.9 times for the MSCI Emerging Markets Index, according to data compiled by Bloomberg.
A measure of real-estate companies in the Hang Seng Index slid 1.7 percent to the lowest level in almost a month. Sino Land dropped the most since October, while Henderson Land Development Co., the Hong Kong builder controlled by billionaire Lee Shau-kee, slumped 2.7 percent. Gemdale Corp. (600383) led declines for mainland developers, plunging 4.3 percent.
Home prices declined in 35 of China’s 70 cities last month from April, the most since May 2012, official data showed June 18. In the financial center of Shanghai, prices decreased 0.3 percent, the first drop in two years, while they fell 0.2 percent in the southern business hub of Shenzhen.
The property market may further deteriorate in the next 6 to 8 weeks on poor sentiment, pushing more developers to cut prices, JPMorgan Chase & Co. analysts led by Ryan Li wrote in report yesterday. Shanghai’s average new home price fell 4.9 percent to 24,642 yuan per square meter in the week ended June 22 from the previous week, property consultant Shanghai Uwin Real state Information Services Co. said in a note today.
Today’s manufacturing report, known as Flash PMI, climbed to 50.8, exceeding the 49.7 median estimate of analysts surveyed by Bloomberg News and a final reading of 49.4 in May. A figure above 50 indicates expansion.
The data contrasted with a separate report from the China Beige Book, published quarterly by New York-based China Beige Book International. It showed that China’s economic slowdown deepened this quarter as capital spending showed weakness and fewer companies applied for credit.
Great Wall, China’s largest SUV maker, slid 4.5 percent in Hong Kong. The company replaced executives in charge of domestic sales, international sales and components procurement after posting sales declines in five of the past six months.
Industrial & Commercial Bank of China Ltd. (601398), the nation’s biggest lender, dropped more than 1 percent in Hong Kong and Shanghai. China Life Insurance Co., the largest insurer, fell 3.1 percent in Hong Kong and slid 1.4 percent in Shanghai.
“The China market is concerned interest rates will surge at the end of the quarter, just like last year, so some people may take profits,” said Teresa Chow, a fund manager who helps oversee about $1.7 billion at RBC Investment Management (Asia) Ltd.
The seven-day repo rate, a gauge of interbank funding availability, rose six basis points, or 0.06 percentage point, to 3.48 percent, the highest level since May 4, according to a daily fixing from the National Interbank Funding Center. The rate jumped 24 basis points on June 20, the most since May 20. Initial public offerings have been playing the biggest role in absorbing funds, said Huang Yanhong, fixed-income analyst at Bank of Nanjing in Jiangsu province.
New listings have become a bastion for speculators who watched many of their favorite wagers turn sour this year amid slowing credit growth, a Communist Party campaign against lavish spending and forecasts for the weakest economic expansion since 1990. IPOs avoided the downturn in part because the securities regulator has pressured companies to price the offerings at below-average valuations in an effort to protect investors.
“IPO markets historically have been a great market to get in,” said Fraser Howie, a director at Newedge Singapore and co-author of “Red Capitalism: The Fragile Financial Foundation of China’s Extraordinary Rise. ‘‘You have the government controlling prices.’’
In Hong Kong, more than 700,000 people have voted after the third day of a democracy poll that China says is illegal, dwarfing the most-optimistic forecasts by organizers. The unofficial 10-day referendum on how to select Hong Kong’s top leader is organized by Occupy Central with Love and Peace, a protest group that plans to hold a sit-in in the city’s financial district if electoral reforms don’t meet its demands.
‘‘The result of the poll is more massive in volume than expected,” Ronald Wan, chief China adviser at Asian Capital, said by phone from Hong Kong. Some investors see this as an “opportunity to offload the shares and then take a wait-and-see approach.”