Hong Kong stocks sink in biggest sell-off since May as city raises trading fees, mainland funds exit by record amounts

Bourse operator HKEX was the biggest drag on Hang Seng Index, as government raises stock trading fees for the first time since 1993

Mainland funds sold a record HK$20 billion of shares and investors ignored Fed’s dovish comment on policy support amid rising bond yields

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Hong Kong markets suffer a beating as traders dump richly valued tech and consumer stocks and mainland funds head for the exits. A government plan to raise stock trading fees also worsens sentiment. Photo: AP

Published: 10:57am, 24 Feb 2021Updated: 5:07pm, 24 Feb 2021

Hong Kong stocks suffered the biggest sell-off in nine months amid rising volatility as traders dumped richly-valued popular bets, brushing aside optimistic economic outlook and dovish comments from the Federal Reserve. A government plan to raise stock trading fees spooked investors.

The Hang Seng Index slumped 3 per cent to 29,718.24 at the close on Wednesday, the steepest decline since May 22. The 30-day volatility of the index jumped to its highest level since August. The Shanghai Composite Index tumbled 2 per cent.

Mainland investors were net sellers of a record HK$20 billion (US$2.6 billion) of local shares through the Stock Connect’s southbound channel on Wednesday, according to the exchange data. That also marked also marking the first outflows since December 18.

Hong Kong Exchanges and Clearing (HKEX) plunged almost 9 per cent, the most in five years. The bourse operator, a beneficiary of record surge in southbound inflows last quarter, started tumbling some seven minutes into Financial Secretary Paul Chan Mo-po’s Budget speech at 11am local time. Its slump contributed one-sixth to the Hang Seng Index’s loss, the biggest drag among component stocks.

“The increase in the stamp duty will have a huge impact on the market in the short term,” said Chen Hao, a strategist KGI Securities in Shanghai. “It will scare away some investors and slow down the southbound inflows, given the move will increase the trading costs.”

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