Financial stocks led a selloff of Hong Kong shares on Monday as investors, spooked by global market turmoil and concerns about the US credit market, cashed out after analysts and traders warned of more pain to come.
Market players said Asia's second-largest stock market - which has now shed nearly 7 percent of its value since marking a record high on July 26 - would stay shaky in coming weeks and warned of further losses before it found its feet.
Jitters about a spreading credit squeeze walloped Asian bourses on Monday with financial shares bearing the brunt of the sell-off. The benchmark Hang Seng Index slid 2.7 percent to finish the session at 21,936.73. Analysts foresee support only at the 21,000 mark. Among the gauge's 30-plus constituents, only Cathay Pacific managed to stay aloft. Hong Kong's dominant international carrier gained a whisker as investors bet on robust first-half earnings, to be unveiled this week.
"It's going to be a market of ups and downs for now. Mostly down," said KGI Asia's Ben Kwong. "There's quite a lot of uncertainty ahead." But he added: "The recent correction provides a very good opportunity for bargain-hunting - if you take a short-term view. You have to be very careful."
Indeed, increasingly nervous investors in Hong Kong hammered financial and resources shares that had enjoyed strong run-ups on the strength of ever-expanding Chinese demand, but were deemed sensitive to economic growth hiccups.
HSBC Holdings, the day's most actively traded stock, lost 1.5 percent. Top domestic insurer China Life dived 4.4 percent. ICBC, the country's largest lender, fell the same amount. And Bank of China, the country's second-largest lender, slid 3.8 percent.
"This is only the beginning of a consolidation phase," Core Pacific-Yamaichi research director Alex Tang said. Main board turnover came to a moderate HK$78.23 billion (US $10 billion), versus Friday's HK$74.3 billion. Investors also cashed out of materials and resources plays.
Aluminium Corp of China, the country's largest aluminium producer, plunged 6.3 percent. Shenhua, the nation's top coal miner, tumbled 5.1 percent. PetroChina Co Ltd, Asia's largest oil producer and Monday's fourth most active counter by value, crumbled 3.4 percent. Smaller rival Sinopec Corp lost 3.2 percent.
Brokers expect financials and resources to trend south - though expectations of strong earnings in coming weeks would lend some support - as investors stay alert for possible redemptions at investment funds.
"The important thing is that the China market did not fall," said Francis Lun, a manager from Fullbright Securities, adding it would provide support to H shares.
The China Enterprises index of H shares, or Hong Kong-listed shares in mainland companies, shed 512.88 points to close at 12,266.79. The H-share index has now dived nearly 10 percent from a life high set last month.
In contrast, the Shanghai Composite Index posted a life high on Monday. Analysts say Shanghai's market, mostly walled off to foreign investors, shrugged off global market woes.
Shares in Henderson Land fell 1.9 percent. The property firm unveiled plans to buy sites and property interests in Shanghai and Beijing for HK$2.08 billion in cash. "It seems that we are more influenced by Wall Street than China," said Howard Gorges, a director from South China Brokerage.