Hong Kong Shares Slump to Two-Month Low on U.S. Election Worries

  • Standard Chartered falls as third-quarter profit disappoints
  • Investors also concerned about southbound selling: Haitong

Election Worries: How to Play the Volatility

Hong Kong stocks slid, with the benchmark index closing at its lowest level since mid-August, as they joined a global selloff amid mounting concern ahead of next week’s U.S. presidential election.

The Hang Seng Index lost 1.5 percent as a gauge of implied volatility jumped to an almost four-month high. Standard Chartered Plc tumbled the most since June after its third-quarter profit trailed analyst estimates on a drop in revenue at all four of its divisions. Hong Kong Exchanges & Clearing & Ltd. fell 1.5 percent ahead of the release of financial results later in the day. PetroChina Co. and China Petroleum & Chemical Corp. dropped as oil extended declines. A gauge of mainland stocks traded in Hong Kong slid 1.9 percent, while the Shanghai Composite Index lost 0.6 percent.

Growing unease in global markets was fueled by an ABC News/Washington Post tracking poll that placed Republican presidential candidate Donald Trump one percentage point ahead of his Democratic rival, Hillary Clinton. The increased angst comes at a bad time for Hong Kong stocks as record inflows by mainland investors dry up and investors bet the Federal Reserve will raise interest rates next month. With the city’s currency pegged to the dollar, its borrowing costs track U.S. rates.

"Everything is just up in the air," said Andrew Sullivan, managing director of sales trading at Haitong International Securities Group Ltd. "The U.S. election is seeing no clear advantage on either side. People are concerned about the net selling on southbound flows for the past couple of days because there are no set reasons as to why that is happening, but it’s happening."

The Hang Seng Index fell to 22,810.50, taking its loss from September’s high to more than 5 percent. The HSI Volatility Index, which measures expected price swings on the gauge, rose to the highest since July 11. The Hang Seng China Enterprises Index dropped to 9,519.87.

The ABC/Washington Post survey added to anxiety sparked by Friday’s announcement that the Federal Bureau of Investigation had reopened its investigation into Clinton’s use of an unauthorized e-mail server. A Bank of America Corp. index tracking volatility expectations in equities, bonds, currencies and commodities rose for five straight days through Monday, the longest run of increases since before the British vote to quit the European Union.

Mainland investors sold a net 1.3 billion yuan ($192 million) of Hong Kong equities in the first two days of the week. They bought a record 58.7 billion yuan worth in September, fueling the biggest quarterly rally by the Hang Seng Index in seven years. Inflows resumed on Wednesday as investors from across the border spent a net 703 million yuan.

Standard Chartered tumbled 7.1 percent. Adjusted pretax profit was $458 million, compared with a loss of $139 million a year earlier, the London-based lender said in a statement on Tuesday. That missed the $520 million average estimate of six analysts surveyed by Bloomberg News.

PetroChina retreated 2.2 percent and China Petroleum & Chemical Corp., also known as Sinopec, fell 1.9 percent. Oil futures lost as much as 1 percent in New York after falling 6.1 percent the previous three sessions. Crude supplies rose by 9.3 million barrels last week, the American Petroleum Institute was said to report Tuesday. 

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