Hong Kong stocks post biggest daily fall in a month as weak China manufacturing data fuels fears of a slowdown

PUBLISHED : Tuesday, 02 October, 2018, 2:46pm
UPDATED : Tuesday, 02 October, 2018, 11:29pm

Hong Kong stocks fell the most in a month on Tuesday, hit by China’s weaker-than-expected manufacturing data that fuelled worries of slowing economic growth amid the ongoing US-China trade war.

The Hang Seng Index dropped 2.4 per cent, or 662.14 points, to 27,126.38, which is the biggest single day fall since September 5 when it fell 2.6 per cent.

The Hang Seng China Enterprises Index also fell 2.4 per cent, or 263.31 points, to 10,754.56 – the biggest single day loss since June 19 when it lost 3.2 per cent.

Brokers said the sharp fall was because of worries about China’s economic outlook. As the mainland market is closed until October 7 because of the Golden Week holiday, the selling pressure was concentrated in Hong Kong, they added.

“US tariffs on China exports are starting to bite,” said Louis Tse Ming-Kwong, managing director of VC Asset Management.

The Caixin/Markit Manufacturing Purchasing Managers’ Index (PMI) released over the weekend fell to 50 in September, below the 50.5 level forecast by economists polled by Reuters and 50.6 recorded in August. The 50-mark divides expansion from contraction on a monthly basis.

The Chongqing People’s Congress proposed to remove the city’s natural gas installation fee to reduce costs for households and to advance price reforms, in moves that would eat into the income of Chinese gas producers.

Deutsche Bank said in a research note that local gas distributors could reduce the relevant initial installation cost to 1,000 yuan (US$145.57) per household from 2,150 yuan, but it was uncertain whether other local governments would follow Chongqing’s move.

Additionally, the last-minute new Nafta agreement that the US reached with Canada and Mexico fuelled expectations that Washington would focus on fighting the trade war with China, analysts said.

“People are taking the opportunity to initiate short positions during China’s holiday because of concerns on the trade war, and on economic and policy risks,” said Stanley Chan, director of research at Emperor Securities. “It’s becoming more apparent that the government wants to crack down across sectors in gas, education, health care, property.”

Enn Energy Holdings slid 14.3 per cent to HK$58.25, China Resources Gas Group slumped 9.6 per cent to HK$28.80 and China Gas Holdings slumped 8.8 per cent to HK$20.20.

Geely Automobile Holdings fell 4.2 per cent to HK$14.94, becoming the day’s worst-performing blue chip.

Chinese financials also fared poorly, with China Construction Bank dropping 3.2 per cent to HK$6.62, while Ping An Insurance was down 2.8 per cent to HK$77.30. AIA Group was 3.4 per cent lower at HK$67.55.

Tencent fell 1.9 per cent to HK317.80.

Standard Chartered lost 3.9 per cent to HK$62.50 after Bloomberg reported that it may face a possible fine of US$1.5 billion from US authorities for violations against Iranian sanctions.

“We continue to cooperate fully with the investigation regarding our historical sanctions compliance, and are engaged in ongoing discussions with the US authorities. While we do not comment on the substance of those discussions, we look forward to resolving these legacy issues,” said a Standard Chartered spokesman in a email statement.

Additional reporting by Chad Bray