Hang Seng slides 1.3pc on euro zone fears

Hong Kong shares fell 1.32 per cent on Tuesday, losing all their gains for 2013 after elections in Italy failed to produce a winner, fuelling fears of gridlock that could spark a new crisis in the euro zone.

The benchmark Hang Seng Index slipped 300.39 points to 22,519.69 – below its December 31 close of 22,656 – on turnover of HK$67.96 billion.

In Italy results from Sunday’s election indicated there would be no clear winner, while the biggest gainer was a protest party run by a popular comedian.

The polls show that while the leftists won the lower house, the party run by former prime minister Silvio Berlusconi had more seats in the upper house.

Investors fear the outcome will lead to political stalemate in the country and a possible return to the dark days of the region’s financial crisis if austerity measures introduced to cut Rome’s huge debt pile are reversed.

On Wall Street, the Dow tumbled 1.55 per cent in its biggest single-day drop since November, while the S&P 500 dived 1.83 per cent and the Nasdaq sank 1.44 per cent.

Steven Leung, director of institutional sales at UOB KayHian, said: “Short term, we face a lot of uncertainties.”

He highlighted the latest news from Italy and the imposition of huge spending cuts in the United States due on Friday as well as Chinese data showing the pick-up in the economy’s recovery was “not as strong as investors hoped for”.

Eyes will now be on US Federal Reserve Chairman Ben Bernanke’s two-day monetary policy testimony to Congress starting later in the day.

Among Hong Kong shares ports investor China Merchants slid 3.4 per cent to HK$26.75 and oil producer CNOOC fell 1.7 per cent to HK$15.06, while conglomerate Citic Pacific dropped 2.5 per cent to HK$11.10.

But Bank of East Asia rose 1.1 per cent to HK$31.25 thanks to a 39 per cent jump in net profit.

And among utilities CLP rose 0.5 per cent to HK$66.85, Hong Kong & China Gas gained 0.5 per cent to HK$21.50 and Power Assets closed 1.1 per cent higher at HK$70.95.

Chinese shares closed down 1.40 per cent. The benchmark Shanghai Composite Index lost 32.48 points to 2,293.34 on turnover of 105.9 billion yuan (HK$130.5 billion).

“We consider the drop a form of consolidation after gains before the holiday,” Morgan Assets analyst Peng Yunliang told Dow Jones Newswires, referring to the Lunar New Year holiday that ended last week.

“We don’t think the market will slide further given there’s no momentum either way amid a period of policy vacuum.”

Brokerages fell on profit-taking. Southwest Securities lost 3.04 per cent to 9.57 yuan and Huatai Securities dropped 2.10 per cent to 10.27 yuan.

Liquor makers also lost ground. Sichuan Tuopai Shede Wine slid 2.16 per cent to 26.32 yuan while Kweichow Moutai tumbled 2.05 per cent to 177.37 yuan.