HONG KONG: China shares suffered their worst daily loss in almost four years yesterday, taking Hong Kong markets lower, with financials hammered on fears that the central bank would keep money tight and economic growth could slow sharply.
Despite money market rates easing for a second-straight session yesterday, mainland investors remained jittery about monetary conditions and braced for disappointment when the People’s Bank of China conducts a scheduled open market operation today.
The CSI300 of the top Shanghai and Shenzhen listings plunged 6.2 percent. The Shanghai Composite Index dived 5.2 percent as volumes spiked to the highest in about a month. Yesterday’s losses were their worst since August 31, 2009.
The Hang Seng Index slid 2.2 percent to 19,814 points, closing below the 20,000-point mark for the first time since September 11. The China Enterprises Index of the leading Chinese listings in Hong Kong tumbled 3.2 percent to its lowest since October 2011.
At $10bn, Hong Kong turnover was off Friday’s three-month high, but was still some 20 percent more than its average in the last 20 sessions. Short selling accounted for 13.6 percent of total turnover, versus the 8 percent historical average.
Late yesterday morning, share-losses accelerated in rising volumes after the Chinese central bank described liquidity in the country’s financial system as “reasonable”, repeating what was said in a Sunday commentary in the official Xinhua news agency.
The commentary also said the latest spike in money market rates was a result of market distortions caused by widespread speculative trading and shadow financing. The central bank, in its quarterly report on Sunday, pledged to “fine tune” existing “prudent” monetary policy.
“I think the market is expecting ‘fine-tuning’ to mean a tightening of liquidity moving forward, especially after the way official media talked about shadow financing over the weekend,” said Cao Xuefeng, Chengdu-based head of research at Huaxi Securities.
“People are quite jittery ahead of the first of two (PBOC) open-market operations for the week on Tuesday. In this market environment, it’s tough to call a bottom, fears could spread about funding for companies,” Cao added. The weakness in the mainland markets also extended to the property and other growth-sensitive sectors.
Reuters
