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Hong Kong Stock Exchange

Hong Kong tumbles to biggest single-day fall since 2011; Chinese shares close mixed as stimulus boost short-lived

Hong Kong shares fall over 1,000 points before paring losses, Greek vote imperils membership in EU

PUBLISHED : Monday, 06 July, 2015, 9:55am
UPDATED : Tuesday, 19 June, 2018, 5:59pm

Hong Kong stocks had its sharpest one-day fall since November 2011 as investors turned risk averse due to worries a Greek vote to reject an aid-for-reform package from its creditors raised the risk of a euro currency break-up.

The benchmark Hang Seng Index lost 827.83 points, or 3.18 per cent, to finish at 25,236.28. That is the largest single-day fall of the market since November 10, 2011, when the it lost 1,050 points.

Equity markets in China finished mixed on Monday, with Shenzhen stocks losing ground and Shanghai shares clawing their way to positive territory as the sweeping weekend stimulus package launched by Beijing failed to pull markets from the beraish grip of a three week long rout.

The benchmark Shanghai Composite Index added 2.41 per cent, or 89 points, to finish at 3,775.91, after rising as much as 7.8 per cent at open.

The Shenzhen Component Index, which is comprised of more smaller and medium-sized companies, lost 1.39 per cent, or 170.29, to close at 12075.77.

ChiNext, which is the country’s version of the tech-heavy Nasdaq board in New York, dropped 4.28 per cent, or 111.45 points, to 2493.83.

“The market is not certain if the many stabilising measures announced by Beijing and the mainland brokers during the weekend would work out well,” said Ben Kwong Man-bun, executive director and head of research of KGI Asia.

READ MORE: Investors still not convinced by Beijing’s bid to end US$2.8 trillion market rout

The latest move by China came in a commitment from the People’s Bank of China providing liquidity for state-backed margin lender China Securities Finance Corp after a weekend meeting of the State Council, China’s cabinet, which was chaired by Premier Li Keqiang.

The move underscored the extent of the state’s exposure to a debt-driven unwind that has erased some US$2.8 trillion from mainland Chinese stock markets in a three-week long rout.   

Watch: Chinese markets cheer weekend support, but volatility may still reign

A total of 21 of the country’s largest brokerages announced plans to pool funds to buy shares in the market and some large firms such as developer China Vanke announced a 10 billion A-share buyback plan on Monday to boost their company’s shares.  

The Shanghai and Shenzhen markets had lost 29 and 32 per cent respectively over the past three weeks through the close of trade on Friday, effectively shoving a market that had hit 7-year highs on June 12 into bear market territory.

Read more: Greece votes 'no' in bailout referendum, putting eurozone membership in peril

Greece hit the Hong Kong share market hard as shares were battered by a sell-off on Monday sparked by the vote in the European country rejecting the bailout package of international creditors.

The city’s de facto central bank, the Hong Kong Monetary Authority, said it is ready to supply liquidity as Hong Kong stocks tumbled over 1,000 points in late afternoon trade on Monday.

The benchmark Hang Seng Index traded under the 25,000-point level for the first time since March 31 as investors exited positions due to worries over the Greek crisis and the fact A-shares in mainland Chinese remained weak despite the Beijing rescue package.

The Hang Seng traded as low as 24,750, the weakest level since finishing at 24,486 on March 27.

“Given the "No" vote in the Greek referendum and the latest developments in the Mainland A shares market, there may be increased volatility in the Hong Kong markets. The banking system in Hong Kong is highly liquid and is well equipped to handle any such volatility,” the HKMA said in a statement.

“The HKMA stands ready to provide liquidity support to the banking system should it become necessary to do so. Investors are advised to remain calm and to manage their risks prudently.”

This wiped off all gains earned since the market rally began on April 8 which at one point pushed the index up by 13 per cent in April and allowed the index to hit a seven-year high above 29,000 points.

The index is now back to the level before mainland Chinese mutual funds were allowed to invest in Hong Kong after a Beijing rule change.

“The Greek crisis has haunted the currency and overseas stock markets that has led to the tumble in Hong Kong stocks. The markets are likely to be very volatile in the short-term,” said Kwong.

Elsewhere in Asia, Tokyo’s benchmark stock index slid 2.08  per cent on Monday, as investors headed for the exits after news that Greeks voted to reject  austerity measures demanded by the cash-strapped nation’s creditors.

The Nikkei 225 at the Tokyo Stock Exchange fell 427.67 points to close at  20,112.12.

The Topix index lost 1.92 per cent,  or 31.73 points, to 1,620.36.

Australian shares were also hit by the uncertainty arising from the Greek vote. The S&P/ASX 200 index lost 1.1 percent, or 63.291 points, to close at 5,475.000. The benchmark had already declined 1.1 percent on Friday.

Top euro zone shares fell 1.7 per cent in early trading on Monday. Banks were the worst hit, with the Euro STOXX banks index down 2.3 per cent. Italian banks including Unicreditwere down 3 to 4 per cent while Portugal’s Banco Comercial Portugues fell 3 percent.