Shares in Hong Kong and Shanghai tumbled on Tuesday as a crippled Japanese nuclear reactor exploded and sent low levels of radiation toward Tokyo, sparking heavy selling of riskier assets worldwide. The benchmark Hang Seng Index fell more than 4.5 percent in morning trade before closing 2.9 percent lower, with turnover on the exchange hitting its highest level in over four months.
China's key stock index fell 1.4 percent. Japanese stocks plunged 10.6 percent, posting the worst two-day losing streak since 1987, as the country's nuclear crisis worsened. "It was a messy day. Lots of rumours flying around and as selling in Japan accelerated, that spilled over to other regions," said an equity derivatives trader in Hong Kong.
The Hang Seng found support in the afternoon R its 200-day moving average, currently at 22,314.5, after the morning's decline threatened to take out strong support at its December low around 22,400. While market players had preferred to wait and watch in the previous session, reflected in Monday's low trading volumes in Hong Kong, there was little interest in doing that on Tuesday.
Volumes on index futures on the Hang Seng Index were nearly twice those seen on Monday, picking up as the Nikkei's losses rapidly accelerated as hedge funds led the worst two-day rout for Japanese shares since 1987. HSBC Holdings and China Mobile, the stocks with the heaviest weightings in the Hang Seng index, fell 2.4 percent and 2.8 percent, respectively.
China's dominant Internet gaming company Tencent Holdings slumped 4.5 percent, with shares giving back some of this year's stellar gains. Despite Tuesday's drop, Tencent is still up 27 percent this year. Ping An Insurance fell 6.1 percent after its $2.5 billion private share placement was received negatively by the market and weighed down other insurers. China Life Insurance dropped 3.3 percent.
Stocks also fell in Shanghai as worries that the People's Bank of China would continue to drain funds from the financial system added to concerns about Japan. "Today is very, very terrible," said Cao Xuefeng, head of research at Huaxi Securities in Chengdu. "This market fall is related to the earthquake in Japan, but it's also because of monetary tightening policies."
The financial sub-index fell 1.9 percent, with Industrial and Commercial Bank of China Ltd , China's largest listed bank, down 0.5 percent. China has started to revive open market operations after keeping them on hold for about four months, and could raise benchmark interest rates soon. Energy stocks that rose on Monday led the decline in mainland shares as investors were quick to take profits amid the growing domestic and global uncertainty.
PetroChina Co Ltd , China's largest listed company by market value, fell 1.3 percent. Major coal player China Shenhua Energy Co Ltd recovered earlier losses to close down 2.7 percent and Yanzhou Coal Mining Co Ltd dropped 5 percent. "The decline in energy stocks is fundamentally profit taking, but they are also down on slumping demand in Japan," said Zhang Yanbing, an analyst at Zheshang Securities in Shanghai.
Companies with make nuclear power equipment continued Monday's slide as Japan struggled to head off a catastrophe. Dongfang Electric Corp Ltd fell 5.2 percent after losing 6 percent on Monday on concerns that the nuclear crisis in Japan could prompt China to rethink its ambitious nuclear power programme. Renewable energy stocks were among the few bright spots in the day's trading. Xinjiang Goldwind Science and Technology Co Ltd, the world's fifth largest maker of wind turbines, jumped 8.4 percent in the stock's heaviest trading since July 2009.
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