Hong Kong’s Hang Seng Index fell to its lowest close in more than a year on concern Greece may be nearing a debt default that could disrupt the global financial system and weaken world economic growth.
HSBC Holdings Plc, Europe’s largest bank by market value, sank 5.5 percent, while Standard Chartered Plc, the U.K.’s second-biggest lender by market capitalization, retreated 4.4 percent. Esprit Holdings Ltd., a retailer that gets most of its revenue from Europe, lost 5.2 percent. China Overseas Land and Investment Ltd., a developer controlled by the nation’s construction ministry, tumbled 7.5 percent after saying property sales in August declined.
The Hang Seng Index slid 4.2 percent to 19,030.54, the lowest close since May 2010. All 46 of the gauge’s stocks dropped. The Hang Seng China Enterprises Index of Chinese companies listed in Hong Kong declined 4.8 percent to 9,967.86. China’s markets are closed today for a holiday.
“The risk of the world falling into a recession is becoming higher and higher because of the Europe situation,” said Alex Au, a Hong Kong-based managing director of Richland Capital Management Ltd., which oversees $300 million. “Asia itself is in pretty good shape, but it won’t be able to escape a global recession, and as an investor there’s not much you can do but to protect your capital.”
The Hang Seng Index fell 1.7 percent last week, ending a two-week streak of gains as a slowdown in China’s industrial output expansion and stalling U.S. jobs growth raised concern about the global economy. Shares on the index traded at 10.1 times forecast earnings, compared with 11.6 times for the Standard & Poor’s 500 Index.
HSBC slid 5.5 percent to HK$61.35, the biggest drag on the Hang Seng Index, after saying Mark McCombe, chief executive officer for Hong Kong operations, is leaving to join another finance company and will be replaced by Anita Fung from today.
Standard Chartered fell 4.4 percent to HK$162 after a report by the Independent Commission on Banking said British banks should be required to insulate consumer units from their investment banks to shield customers and taxpayers from the consequences of a financial crisis.
Esprit retreated 5.2 percent to HK$18.66, while Cosco Pacific Ltd., which operates container facilities at Greece’s Piraeus port, dropped 5.2 percent to HK$8.92. Prada SpA, the Italian maker of luxury goods, tumbled 8.8 percent to HK$38.30.
Futures on the Standard & Poor’s 500 Index lost 1.4 percent today. In New York, the index fell 2.7 percent on Sept. 9 after three German officials said Chancellor Angela Merkel’s government is preparing plans to shore up banks if Greece defaults. The European Central Bank said Juergen Stark resigned from the executive board, indicating policy makers may be divided over how to cope with the debt crisis.
China Overseas Land dropped 7.5 percent, the steepest drop in the Hang Seng Index, after saying property sales in August declined 11 percent from a year earlier to HK$4.4 billion ($564 million).
China National Building Material Co., a mainland cement maker, tumbled 11 percent to HK$9.05 after Sws Research Co. cut its rating on the stock to “neutral” from “buy.”
Cnooc Ltd., China’s biggest offshore oil producer by market value, sank 4.3 percent to HK$13.40 after crude prices dropped. PetroChina Co., the nation’s largest oil company by market value, retreated 4 percent to HK$9.29.
Crude for October delivery dropped 2 percent to settle at $87.24 a barrel in New York on Sept. 9.
Futures on the Hang Seng Index dropped 3.7 percent to 18,996. The HSI Volatility Index surged 23 percent to 38.77, the highest close since Aug. 26, indicating options traders expect a swing of 11 percent in the Hang Seng Index in the next 30 days.