Hong Kong stocks plunge on weak China non-manufacturing data

Weaker expansion in the mainland's non-manufacturing sector causes decline

PUBLISHED : Saturday, 04 January, 2014, 1:54am
UPDATED : Saturday, 04 January, 2014, 1:54am

Hong Kong's stock market took its biggest dive in six months yesterday as new data showed the mainland's non-manufacturing sector posted the slowest expansion in four months, fuelling fresh concerns of an economic slowdown.

The Hang Seng Index lost 2.24 per cent, or 522.77 points, to finish at 22,817.28 points. The Shanghai Composite Index, meanwhile, fell 1.2 per cent to 2,083.14 points.

The mainland's non-manufacturing purchasing managers' index dropped to 54.6 in December, the lowest since August and down from 56 a month earlier, the National Bureau of Statistics and the Federation of Logistics & Purchasing said yesterday.

A reading above 50 suggests expansion.

The People’s Bank of China hasn’t injected much capital … in recent months

Mainland bank stocks saw heavy sell-off on investor concerns about the tightening in the interbank market.

"The People's Bank of China hasn't injected much capital into the money market in recent months and as the Spring Festival approaches, there is increasing concern about lenders' liquidity adequacy," said Kenny Tang, general manager of the securities business division at AMTD Financial Planning.

Industrial and Commercial Bank of China lost 2.7 per cent while China Construction Bank dropped 2.4 per cent.

Energy firms also took a heavy hit in yesterday's trading as oil futures posted the sharpest decline in more than a year in New York, while mainland financial stocks lost ground as investors cut risks.

The mainland's biggest energy producer PetroChina lost 3.1 per cent and CNOOC, its biggest offshore oil developer, declined 3.9 per cent.

China Cinda Asset Management, the country's biggest state-owned bad-loan manager, bucked the trend by adding 1.4 per cent on speculation that the company would benefit from Beijing's anticipated thrust on the rising local government debt.

The National Audit Office released on December 30 the result of its latest survey of local government debt, which showed that debts totalled 17.9 trillion yuan (HK$22.7 trillion) in June.

"Overall debt is rising too rapidly and the pace of increase needs to be reined in," a Royal Bank of Scotland report said yesterday. "This calls for both specific measures to rein in increases in local government debt and tighter monetary policy."