Chinese Stocks Decline Most in a Month in Hong Kong on Economy

Updated on
  • PetroChina leads slump for commodity shares with 6.5% plunge
  • Official manufacturing data likely to show contraction

What's Fueling the Asian Selloff?

Chinese stocks tumbled in Hong Kong, with the benchmark gauge heading for its steepest quarterly loss in four years, as a commodity rout deepened concern about the nation’s growth outlook.

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The Hang Seng China Enterprises Index slid 3 percent to 9,230.50 at the close in Hong Kong, the biggest loss in a month, while the Hang Seng Index dropped 3 percent to a two-year low. PetroChina Co. and Jiangxi Copper Co. slumped more than 4 percent after commodities trader Glencore Plc plunged by a record. The Shanghai Composite Index declined 2 percent in thin turnover.

Glencore is the latest victim of the growth slowdown, with its value slashed by about a third Monday amid concern over the commodity trader’s debt and waning raw materials demand. A Bloomberg index of commodity futures has fallen 50 percent since a 2011 high. Data on Monday showed industrial profits dropping the most in at least four years, while an official manufacturing report scheduled for Thursday will likely a show a contraction.

“The economy is getting worse and there’s no sign of a bottom in sight,” said Castor Pang, head of research at Core-Pacific Yamaichi Hong Kong. “Resource companies are hit hard by the slowdown as shown in the industrial profit data this week. The outlook for the stock market doesn’t look so promising in the next quarter.”

Worst Performers

Gauges of Chinese shares listed in Hong Kong and Shanghai are the world’s worst performers this quarter as a stock boom turned to bust and data signaled a sharper slowdown for the nation’s economy. An unprecedented state rescue effort to stabilize shares on mainland bourses -- including a ban of selling shares by some stakeholders and curbs on short selling -- increased volatility while damping trading.

The H-shares measure has fallen 5.2 percent this month, extending losses this quarter to 29 percent. The Shanghai gauge has also dropped 29 percent since the start of July, poised for the worst quarter since 2008.

Turnover in Shanghai slumped to the lowest level since November on Monday. Trading volumes tumbled 52 percent below the 30-day average on Tuesday, ahead of the week-long National Day holiday that starts Thursday.

Hong Kong’s markets were shut on Monday, when the Chinese government released data showing industrial companies’ profits dropping 8.8 percent last month. That’s the steepest loss since at least October 2011, when the government began releasing monthly data.

Commodities Slump

In Hong Kong, coal producer China Shenhua Energy Co. slid 5.3 percent, while
China Petroleum & Chemical Corp., known as Sinopec, plunged 7.3 percent.

Returns of raw materials plummeted last month to the lowest level since 1999 as supplies outstrip demand amid forecasts for the slowest Chinese growth in more than two decades. Glencore, which rode the China-fueled boom in commodities the past 10 years, is emerging as the most prominent casualty of the bust. The company is Australia’s biggest producer of thermal coal and one of the main grain exporters from the country.

The CSI 300 Index fell 2 percent, dragged down by material and energy companies. Anhui Conch Cement Co. retreated 4.4 percent. Yanzhou Coal Mining Co. slid 5.5 percent.

Weak economic data and a short-term liquidity drain due to intervention in the currency market have made the chance of a reserve-requirement ratio cut before Thursday “exceptionally high,” Douglas Morton, Aviate Global LLP analyst, wrote in a note.

Margin traders reduced holdings of shares purchased with borrowed money on Monday, with the outstanding balance of margin debt on the Shanghai Stock Exchange dropping 0.2 percent to 578.1 billion yuan ($90.8 billion).