Chinese Shares in Hong Kong Follow Mainland Into Bear Market

Chinese companies traded in Hong Kong fell 20 percent from a May high, following mainland shares into a bear market.

The Hang Seng China Enterprises Index sank 3.3 percent to 11,827.30 on Tuesday, led by Citic Securities Co. Haitong Securities Co., Citic Securities and China Railway Group Ltd. dropped the most on the H share gauge during the period, posting declines of at least 37 percent. The city’s benchmark Hang Seng Index entered a correction on Monday, sliding 11 percent from its April peak.

“It’s not easy for the market to regain confidence, and until that happens Hong Kong may remain under pressure,” said Linus Yip, a Hong Kong-based strategist at First Shanghai Securities Ltd. “We need to see whether China’s policies can support the mainland shares.”

The declines in Hong Kong markets follow a plunge on the mainland that’s wiped out about $3.2 trillion since June 12. Government efforts to bolster stocks in Shanghai and Shenzhen including an interest-rate cut, suspension of new listings and looser margin-financing rules have done little to curb declines. Traders reduced Shanghai equity investments purchased with borrowed money by 93.6 billion yuan ($15 billion) on Monday, the most since at least 2010.

Mainland investors have also been offloading Hong Kong-listed shares, turning net sellers through the Shanghai stock link for a seventh straight day on Tuesday, the longest such streak since the program began in November.

A Hang Seng index tracking the mainland premium on dual-listed shares surged a record 10 percent Monday as equities in Hong Kong plunged. It extended gains today, making mainland shares 48 percent more expensive.

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