China Stock Turmoil 2015

Hong Kong stocks fall to two-year low on Glencore and China growth concerns

Worries about commodities giant and Chinese economy hammer market

PUBLISHED : Wednesday, 30 September, 2015, 12:41am
UPDATED : Wednesday, 30 September, 2015, 8:15am

Hong Kong stocks finished on Tuesday at their lowest levels in more than two years, as falling commodity prices and worries over China's weakening economy dragged on resource and financial stocks.

The Hang Seng Index fell 3 per cent to end at 20,556.6 points, its lowest level since July 2013. Turnover for the main board reached HK$84.03 billion, compared with Friday's market turnover of HK$69.06 billion. Meanwhile, the H-share index, which tracks Hong Kong-listed Chinese companies, dropped 3 per cent to 9,230.5 points.

Among top percentage decliners, Swiss-based commodities giant Glencore plummeted 29.32 per cent to close at HK$8.68, after its London-listed shares plunged 23.54 per cent on Monday.

An analyst note by investment bank Investec warned on Monday that Glencore's equity value might evaporate if commodity prices remain depressed, as the company's earnings have been hit by a slide in copper prices amid China's economic slowdown, according to a Reuters report.

As of Tuesday evening, the London-listed shares of Glencore rebounded 19.9 per cent to £82.26 in mid-afternoon trading. However, the stock is still down 71 per cent since the start of the year.

Analysts said the sell-off in Glencore, falling commodity prices and increasing worries over China's weakening economy helped fuel the overnight sell-off in European and US stocks, with most Asian markets extending the declines yesterday.

"The sentiment is very weak, as some investors are losing confidence after China's economy showed fresh signs of further weakening," said Christopher Cheung, the chairman of Christfund Securities.

He added that "some funds are leaving Hong Kong markets".

"Sectors that experienced strong selling pressure are all immediate losers from China's slowdown," said Louis Tse Ming-kwong, a director at VC brokerage.

The mainland reported on Monday that aggregate industrial profit tumbled 8.8 per cent in August, the sharpest year-on-year monthly fall in four years.

The benchmark Shanghai Composite Index retreated 2.92 per cent to end at 3,038.14 points, and the large-cap CSI300 lost 1.97 per cent to 3,178,85 points. In Shenzhen, the technology-heavy Shenzhen Composite Index dropped 1.51 per cent to 1,711.71 points, and the Nasdaq-style ChiNext Index declined 1.12 per cent to 2,098.57 points.

In Hong Kong, resources stocks were among the biggest decliners. Kazakh copper miner Kazakhmys sank 37.1 per cent to HK$8.80, after copper prices declined further on Monday on Comex in New York. Jiangxi Copper, China's top copper producer, also skidded 4.7 per cent to HK$9.23.

Gold miners pulled back substantially after gold futures posted their largest daily loss in nearly three weeks on Monday on Comex in New York. Lingbao Gold dropped 7.8 per cent to HK$1.30, Zijin Mining Group gave up 4.5 per cent to HK$1.93, and Zhaojin Mining erased 2.6 per cent to HK$4.05.

Mining stocks were "at the heart of" the stock selling, with traders "absolutely concerned about follow-through selling in the commodity complex overnight", said Chris Weston, an analyst for IG Group, on Monday.

In the energy sector, offshore oil producer Cnooc slid 7.7 per cent to HK$7.44 after international crude futures settled sharply lower on Monday. Refining giant China Petroleum & Chemical Corp also sank 7.3 per cent to HK$4.48, and oil and gas producer PetroChina lost 6.5 per cent to HK$5.19.

In addition to resource stocks, Chinese financial shares also reeled from another round of weakness, with Industrial and Commercial Bank of China off 2.9 per cent in Hong Kong, China Construction Bank down 2.7 per cent, and Bank of China lower by 2.4 per cent. In Shanghai, Bank of China gave up 2.1 per cent, China Construction Bank eased 1.5 per cent, and Industrial and Commercial Bank of China nudged down 1.4 per cent.