Hong Kong’s stocks took a battering on Thursday, with the benchmark index falling 4% in late morning trade as worries about the health of the global economy, particularly China, sparked a sell-off in financials and energy shares.
Stocks were set for their biggest daily drop in six months after they reopened from a three-day break, catching up with global peers. China-related stocks and banks were singled out for special punishment.
The China-enterprises index fell 5%, its worst single-day performance since 24 August 2015, and was the top loser in Hong Kong as some investors preferred to execute their bearish China calls through the liquid Hong Kong market.
Technology shares also took a beating, mirroring their global counterparts, as investors were spooked by the fragility of the global economy and lenders’ exposure to commodities.
Nitin Dialdas, chief investment officer at Mandarin Capital in Hong Kong, said: “I think this is going to be a difficult year for investors and even a fledgling US economic recovery looks to be snuffed out by global markets developments.”
Volume was thin with only 14bn Hong Kong dollars’ ($1.8bn) worth of shares changing hands after local markets reopened following the lunar New Year holidays. China’s markets remain closed and will reopen on 15 February.
Charles Li, the chief executive of the Hong Kong Stock exchange, said: “There is very little good news and continuous bad news and this is a test of market confidence.”
On a price-performance basis, Hong Kong’s shares have held up relatively better than their mainland counterparts so far this year, but bloody clashes between street vendors and police over the long break stirred concerns about social stability in the former British colony.
Property shares also came under pressure after data showed last week that Hong Kong property transactions fell 12% in 2015, underscoring fears about an economic slowdown in the Asian financial center as it faces cooling activity in China.