Hong Kong stocks slide 2 per cent on 30th anniversary of Black Monday
Nearly all of the companies listed on the Hang Seng Index retreated exactly three decades after Wall Street’s biggest ever one-day collapse
Hong Kong stocks declined sharply on Thursday, with 47 of the 50 components falling in the benchmark Hang Seng Index. Mainland markets also fell.
Analysts said investors’ anxiety on the 30th anniversary of Black Monday may have depressed the market, while China’s latest economic data raised some concerns about slowing growth in the fourth quarter.
The Hang Seng Index slumped 1.9 per cent, or 552.67 points, to close at 28,159.09, snapping a five-day winning streak. The Hang Seng China Enterprise index, known as the H-share index, tumbled 2.3 per cent to 11,357.45.
Daily turnover jumped 33 per cent to more than HK$116 billion.
Car maker Geely Auto sank 7.5 per cent to HK$24.85, the biggest loser among Hang Seng constituents. Tencent dropped 2.4 per cent to HK$346.2, responsible for 73 points of losses in the index.
“The Hang Seng Index has already gathered significant gains this year. Risks [of possible retreats] are increasing, ” said Linus Yip, chief strategist at First Shanghai Securities.
“Today is the 30th anniversary of Black Monday. The feeling that something is about to happen may create a self-fulfilling effect.”
October is also traditionally a dangerous month in the financial calendar, Yip said, as stocks tend to decline because of the so-called “October” effect.
On October 19, 1987, stock markets around the world suffered a sudden and dramatic crash, starting in Hong Kong, and quickly spreading to other regions. The Dow Jones in the US plummetted more than 20 per cent on the same day.
Yip said he had noticed some previously hot sectors had lost their upwards momentum or seen their share prices pull back, including cars, technology, and Chinese property developers.
“It’s a sign that the market may enter a consolidation period. Investors should be cautious,” he warned.
Earlier in the day, Chinese government data showed national GDP expanded 6.8 per cent year on year in the third quarter, slightly lower than the 6.9 per cent growth in the previous quarter, but matching previous market forecasts.
“Q3 GDP slowed to 6.8 per cent, as tougher environmental regulations took a toll on heavy industries,” said Julia Wang, economist for Greater China at HSBC, in a note on Thursday.
“With the winter season production caps due to kick in over the next few months, both investment and output in some parts of the industrial sector may come under further pressures.”
ZTE, China’s largest telecom equipment supplier, plunged 11.4 per cent to HK$26.15, after it reported revenues grew 7 per cent for the first three quarters of the year, with net profit up 37 per cent.
But UBS highlighted the fact its revenue growth for the third quarter had slowed to 5.2 per cent from 13.1 per cent in the first half, possibly due to a cutback in capital expenditure by mainland telecom service operators.
UBS maintains a “Sell” rating for the stock, citing possible risks as its shares have already soared more than 110 per cent so far this year. Morgan Stanley also maintained a “Sell” rating in its latest report, partly due to what it considers a high valuation for the company.
Insurer AIA Group retreated 1.4 per cent to HK$61.1 after recent gains, as it prepares to unveil third-quarter results on Friday.
On the mainland, the Shanghai Composite Index eased 0.3 per cent to close at 3,370.17. The CSI300 dropped 0.3 per cent to 3,931.25. The Shenzhen Composite Index fell 0.8 per cent to 1,983.72, while the start-up ChiNext index was down 0.3 per cent to 1,862.61.
On Wednesday, the Hang Seng Index had closed 0.1 per cent higher at 28,711, up for a fifth straight session to a fresh 10-year high.
The 19th party congress kicked off on Wednesday in Beijing, with nearly 2,300 delegates gathering for the twice-a-decade political event, set to confirm President Xi Jinping for his second five-year term as party chief.
In his opening speech, Xi outlined a timetable for China’s economic goals. The plan is to narrow the wealth gap and “basically realise socialist modernisation” by 2035, and then become a leading global power from 2035 to 2050.