Hong Kong shares tumbled 2 percent to their lowest close for the year on Monday as weak US data added to worries about Europe's deepening debt crisis and China's slowing economy, driving investors out of riskier assets. All major Asian stock markets slumped as global investors continued to flee from equities, which until the end of the first quarter this year had been among the best performing asset classes.
--- Shanghai Comp down 2.7pc, CSI300 falls 2.8pc
The latest wave of selling was sparked by surprisingly weak US job data on Friday, which followed disappointing manufacturing data from China and from Europe. Stocks on Wall Street suffered their worst day of the year after the jobs report, further depressing sentiment in Asia on Monday.
The outlook on China was further soured by an official survey of services activity released on Sunday, which showed the sector's rate of growth slowed for the second straight month in May. The Hang Seng index ended down 2 percent and turned negative on the year, while the China Enterprises index of top locally listed mainland firms fell 2.6 percent.
"You're seeing bad headlines from across the world now, not just Europe," said Larry Jiang, Hong Kong-based chief investment strategist at Guotai Junan Securities. "The jobs number from the US was shocking and Spain is now becoming a big worry. On top of that everyone who thought Q1 would be the bottom for the Chinese economy has realised that this is a real slowdown that could go on," said Jiang.
On the mainland, the Shanghai Composite slid 2.7 percent, while the large-cap focussed CSI300 shed 2.8 percent. China's censors blocked access to the term "Shanghai stock market" on popular microblogs after the index fell a bizarre 64.89 points on the anniversary of the bloody June 4, 1989, crackdown on pro-democracy protesters in Tiananmen Square.
The worst-hit sectors in Hong Kong remained cyclicals such as materials, mining and energy that are closely linked to economic growth. Sub-indices for the materials and energy sectors fell 3 and 2.5 percent, respectively. Steel firm Maanshan Iron & Steel dropped 7 percent while larger peer Angang Steel fell 5 percent, both extending their May rout. Oil major CNOOC dropped 2.6 percent while China's largest coal producer China Shenhua dropped 4.2 percent.
The biggest drag on the Hang Seng, however, was HSBC Holdings, which fell 1.2 percent to a 4-1/2 month closing low. Shares of Europe's largest bank, which commands a 15 percent weighting on the Hong Kong benchmark, have slumped more than 16 percent from a February 21 high as the eurozone debt crisis worsened.
Sands China which had its first trading day as a part of the Hang Seng Index, fell 4.8 percent after Deutsche Bank cut its target prices of Macau gaming stocks by 6 to 13 percent, partly on slowing growth in the gambling encave. Growth in gambling revenue from Macau slowed to a three-year low, data showed last Friday.
Sands China is still Deutsche Bank's top pick in the sector, which remains a "buy" from the brokerage. "Macau stocks are particularly sensitive to investor risk appetite changes. While macro risks remain, long term investors can see this as a good buying opportunity," said Deutsche Bank in note to clients. Offering investors the relative safety of a high-dividend and less volatile stock price moves, real estate investment trusts (REITs) and utilities outperformed on the day.
Hong Kong utility companies CLP Holdings and Power Assets both closed up 0.6 percent. Link REIT, which sports a 4.1 percent dividend yield, according to Thomson Reuter data, fell just 0.2 percent. The company was able to place $240 million worth of stock recently in a single deal which shows there is solid demand for shares, analysts at Daiwa Capital said in a note.
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