Chinese H Shares Bear Brunt of Selling as Yuan Pressures Build

  • Measure of property companies leads decline in Hong Kong
  • PetroChina, Sinopec fall after Wednesday’s jump, oil drop

Chinese stocks in Hong Kong tumbled the most in Asia, led by banks and insurers, as investors feared a faster pace of U.S. interest-rate hikes will pressure the yuan to weaken beyond an eight-year low. The nation’s bonds plunged.

The Hang Seng China Enterprises Index slumped 2.3 percent to 9,479.16 at the close, its biggest drop since Nov. 9., with China Life Insurance Co. and China Merchants Bank Co. leading declines. Hong Kong property developers sank on concern higher borrowing costs will cut demand for housing. Mainland equities were more mixed, with the Shenzhen Composite Index rebounding from a four-month low. The yuan slid 0.4 percent against the dollar, while China’s 10-year sovereign bond yield jumped a record 22 basis points.

The Federal Reserve lifted borrowing costs by a quarter percentage point on Wednesday, while officials moved their 2017 rate path projections to three hikes from two, triggering a surge in the dollar and Treasury yields. Chinese officials have been grappling with capital outflows as the yuan extends Asia’s biggest retreat against the greenback this year.

"This time the more hawkish Fed will cause concerns about more fund outflows from China and a weaker yuan," said Daniel So, a strategist at CMB International Securities Ltd. in Hong Kong. "Financials in general are being dragged down by a weaker yuan because their assets are mostly in yuan."

The Hang Seng Index dropped 1.8 percent with a measure of property companies leading the decline, while the Shanghai Composite Index lost 0.7 percent to drop to its lowest close since Nov. 2. The Hang Seng Composite Index fell 1.6 percent, with all 11 industries on the measure sliding.

  • Hong Kong’s key rate was raised to 1 percent Thursday from 0.75 percent, according to HKMA data
  • PetroChina Co. fell 1.8%, China Petroleum & Chemical Corp. slid 2.1% after jumping on Wednesday; oil futures held losses near $51 a barrel
  • China Mengniu Dairy Co. dropped 2.8% after saying it expects to record a “substantial” loss
  • Link Real Estate Investment Trust, New World Development Co. and Hang Lung Properties Ltd. led declines by property shares
  • Meitu Inc., which made its debut Thursday as Hong Kong’s biggest technology company listing since 2007, was unchanged from an offer price that was already at the bottom of a marketed range
Before it's here, it's on the Bloomberg Terminal.