Hong Kong shares slid 2.5 percent Tuesday, dragging the main index below the 22,000 support level as resources stocks crumbled under retreating commodity prices and HSBC slipped on less-than-stellar first half earnings. The main index widened losses in the afternoon session after Hong Kong's fifth-largest lender, Bank of East Asia, tumbled on disappointing first half earnings.
The stock slid more than 12 percent to a two-year low before recovering a bit to close 8.3 percent lower. Index heavyweight HSBC slid 2.2 percent after the global lender reported a 28-percent drop in first-half profit on Monday as it took a $14 billion hit from bad debts on US home loans and asset write-downs.
UK-based Standard Chartered also fell 1.6 percent ahead of its first half earnings announcement. The lender reported 31 percent rise in net profit helped by growth in emerging markets. Resources stocks tanked in tandem with slumping oil and metal prices as more US economic gloom and a glimmer of deceleration in China added to fears about a global slowdown.
"You've got an economic slowdown and markets are slowly coming to terms with it. Some of the speculation that was looking for a safe harbour in commodities is starting to unwind," said Mark Konyn, chief executive of Allianz SE's RCM Asia Pacific arm, which manages about $15 billion.
The Hang Seng Index closed down 565.17 points at 21,494.75 after slipping to 21,739.22 earlier. Mainboard turnover rose to HK$64 billion ($8.2 billion) from HK$49.1 billion on Monday. Offshore oil producer CNOOC dropped 6.3 percent to its lowest level since end-March after crude prices fell to a three-month low. The world's most valuable coal mining company, China Shenhua Energy, tumbled 8.9 percent to become one of the biggest decliners on the H-share index. The stock closed at HK$25.45, its lowest level in nearly a year.
Gold miner Zijin Mining slumped 11.3 percent to a one-year low after prices of the precious metal fell below $900 an ounce on weaker oil, reducing its safe-haven appeal. The China Enterprises Index of top locally listed Chinese firms fell 2.8 percent.
Metal stocks joined the slump with steep losses on concern over slowing economic growth in China, which is seen blunting demand. China's third largest steel manufacturer, Angang Steel tumbled 11.7 percent while Maanshan Iron & Steel dropped 8 percent. Aluminium Corp of China gave up 7.8 percent. Bucking the trend on the main index, Hong Kong's largest airline Cathay Pacific Airways gained 0.4 percent on the prospect of lower fuel costs.
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