Hong Kong’s benchmark stock gauge plunged the most since the global financial crisis as an equity rout in mainland China rippled across Asia.
The Hang Seng Index fell 5.8 percent to 23,516.56 at the close today, the biggest drop since November 2008, after slumping as much as 8.6 percent. All but one stock on the 50- member gauge slid amid trading volume 148 percent higher than the 30-day average. A measure of Asian shares headed for its steepest drop in two years.
Financial and property companies led declines in Hong Kong today, with China Life Insurance Co. falling 8.8 percent and China Overseas Land & Investment Ltd. tumbling 10 percent. The Hang Seng China Enterprises Index, also known as the H-share gauge, dropped 6.1 percent after following mainland shares into a bear market on Tuesday with a 20 percent retreat from a May high. The Shanghai Composite Index closed 5.9 percent lower, extending its decline from a June 12 high to 32 percent.
“Investors are disappointed and afraid that the Chinese policy makers lost control of the market,” said Mari Oshidari, a Hong Kong-based strategist at Okasan Securities Group Inc. “With no end in sight to the plunge, sentiment has turned cold. With liquidity drying up in the mainland, the Hong Kong market is being sold instead –- the only thing it can do is just quietly take the storm.”
The decline dragged the Hang Seng gauge to 9.8 times reported earnings, the cheapest relative to the MSCI All-Country World Index since 2003, when the city was gripped by the SARS virus which killed 300 people and caused economic losses totaling HK$3.8 billion ($490 million) in two months.
The 10 companies that fell the most on the Hang Seng Index sank by at least 7.6 percent. China Shenhua Energy Co. plunged 9.3 percent and China Resources Land Ltd. lost 8.4 percent. HSBC Holdings Plc retreated 3.9 percent, its steepest drop in almost two years. Some of the most heavily traded shares through the Shanghai link yesterday, including Bank of China Ltd. and Hong Kong Exchanges & Clearing Ltd., posted even larger declines today.
Mainland investors were net sellers through the Hong Kong-Shanghai stock link for an eighth day amid unprecedented liquidation of margin trades. A Hang Seng index tracking the mainland premium on dual-listed shares advanced 0.2 percent, signaling China traded shares are 48 percent more expensive.