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Hong Kong stocks dropped the most in two weeks on Thursday, led by energy counters and property developers, on concern that China’s manufacturing may contract for a 11th month in September and fears that there will be no letup in a crackdown on China’s property sector.
Released this morning, the HSBC Flash China manufacturing purchasing managers’ index (PMI) edged up to 47.8, from 47.6 in August. Any reading above 50 indicates that factories’ activities are expanding, but anything below 50 denotes contraction. Most of the indicators, including output, new orders, new export orders, employment, show contraction for this month in China.
“China’s manufacturing activities remain lacklustre, thanks to weak new business flows and a longer than expected de-stocking process. And this is adding more pressures to the labour market,” Hongbin Qu, Chief Economist, China & Co-Head of Asian Economic Research at HSBC told clients in an e-mailed note.
The benchmark Hang Seng Index lost 1.20 per cent to finish at 20,590.92, making the biggest single-day decline since September 5. The Hang Seng China Enterprises Index lost 1.43 per cent to end at 9,707.91.
Funds flowed to the utilities sector, normally seen as a safe haven, as the PMI reading lifted investors’ risk aversion. Investors also continued to take profit on commodities and property stocks after the recent rally.
“There could be a tumble for the Hang Seng Index ahead if the upcoming data from China continues to look bad,” said Castor Pang, head of research at Core Pacific-Yamaichi. Investors are waiting for gross domestic product growth data for the third quarter and September new loan growth figures. “Investors will dump shares and leave the market if the data is disappointing,” Pang said.
Energy counters lost ground as global crude prices extended declines on Thursday amid talk of increased Saudi Arabian supplies to help cool the market. CNOOC (0883.HK) shed 3.46 per cent to finish at HK$15.64.
Brent November crude eased 32 US cents to US$107.84 a barrel as of 4:30 pm in Hong Kong, its fourth day of losses. The contract for US October crude, which expires later on Thursday, was down US$1.01 at US$90.97 a barrel. It fell to a low of US$90.88, the lowest since August 6.
Chinese property stocks lost ground, after mainland media reported that China’s vice premier Li Keqiang, who is to step in for Wen Jiabao as prime minister this autumn, said it would stop home prices from rising too rapidly. Rating agency Standard & Poor’s said on Wednesday that mainland property prices had room to fall another five per cent in the second half, given the high inventories.
Hong Kong-based apparel retailer Bossini International (0592.HK) lost 5.81 per cent to finish at HK$0.41. Net profit plunged 87.7 per cent to HK$16 million for the year ended June 30 due to stiff competition and rising costs.
Luk Fook (0590.HK) lost 6.75 per cent to HK$24.85, after saying that Paul Law would step down as executive director and financial controller from December 1 for personal reasons, and Chan So-kuen had been appointed as chief financial officer, effective September 17.