China and Hong Kong shares tumble again amid global market gloom, more volatility seen

Mainland China and Hong Kong stock markets tumbled anew of Friday, becoming the worst performers among global indices in the week in the wake of sharp falls in major global markets, and analysts see further volatility with a major holiday period looming.

The Shanghai Composite Index fell 4.1 per cent, or 132.20 points, to 3,129.85 at the close, bringing losses to 9.6 per cent this week. The decline was the biggest for a five-day period in two years. In Hong Kong, the Hang Seng Index lost 3.1 per cent, or 943.85 points, to end at 29,507.42, making its losses this week 9.5 per cent.

“It is a major correction at the moment, due to a big profit in the past year, and the market sentiment is now fluctuating, since investors will take profits before the Lunar New Year holiday and there is concern over interest rates,” said Gordon Tsui, managing director at Hantec Pacific.

Hong Kong’s Hang Seng China Enterprises Index, or the H-share gauge, slid 3.9 per cent while mainland China’s CSI 300 Index of big-caps tumbled 4.3 per cent.

About 100 stocks on the Shanghai and Shenzhen exchanges fell by the 10 per cent daily limit on Friday, while all the members of the Hang Seng fell except Sunny Optical Technology Group and AAC Technologies Holdings.

“After the moves earlier this week market investor sentiment is fragile, and because of this we aren’t expecting the markets to immediately start moving higher once again,” said Kerry Craig, global strategist at JPMorgan Asset Management. “Volatility may remain for a while longer, but the strong economic backdrop and sustained earnings outlook means we continue to prefer equities.”

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In Hong Kong, financial stocks were the biggest drags, with China Construction Bank down 4.5 per cent to HK$7.72 and AIA Group retreating 4.3 per cent to HK$4.28. The two accounted for a quarter of the decline on the Hang Seng on Friday.

Tencent Holdings, the biggest weighted stock in the index, shed 3.1 per cent to HK$407.40. Property firm Country Garden Holdings lost 6.7 per cent to HK$13.12, adding up to a 21 per cent loss this week and becoming the worst performer on the Hang Seng. China Overseas Land & Investment fell 2.8 per cent to HK$26.35, making a 15 per cent drop for the week.

Mainland investors were net buyers of Hong Kong stocks for a second consecutive session on Friday, betting that equities will draw interest as their valuations drop to the lowest among the world’s major markets.

Net inflows reached 502.4 million yuan (US$80 million) after net purchases of 1.6 billion yuan stocks for the previous day, according to Bloomberg data. Mainland investors had sold 869 million yuan of Hong Kong shares on Wednesday, the first daily net sales this year.

In mainland China, energy and financial stocks – the best-performing sectors this year – bore the brunt of the selling, down by at least 5.3 per cent. Shanxi Xishan Coal & Electricity Power plunged 10 per cent to 9.25 yuan and China Coal Energy slid 8.7 per cent to 5.35 yuan.

Citic Securities slid 9.8 per cent to 17.35 yuan and New China Life Insurance slumped 9.1 per cent to 51.63 yuan. Guoyuan Securities shed 8.9 per cent to 9.18 yuan.

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