Hong Kong stocks closed flat on Monday, giving up early gains when concerns over slowing economic growth and rising producer price inflation in China sent shares in most mainland manufacturers tumbling. "The higher producer price inflation in China is expected to feed into the consumer price inflation and raise the threat of credit tightening again," said Howard Gorges, vice-chairman of South China Brokerages.
China's factory-gate prices jumped 10.0 percent in the year to July, the first double-digit rate since the mid-1990s. Shares in timepiece-maker and retailer Peace Mark Holdings plunged more than 70 percent at one point, as institutional investors dumped the stock on worries about the firm's high debt leverage and lack of clarity in its recent annual report.
The stock recovered to end Monday down 42.2 percent with more than 264 million shares changing hands. China's largest offshore oil producer CNOOC slipped more than 3.2 percent, weighed down by a 20 percent slide in crude prices in the past month from record highs.
Shares of Foxconn International Holdings Ltd, the world's largest contract cell phone maker, soared 9.5 percent on improved sentiment after its Taiwanese parent Hon Hai Precision Industry posted strong growth in July revenue. The Hang Seng Index closed 25.87 poinst or 0.1 percent lower at 21,859.34 after surging to 22,235.51 earlier on lower crude.
"We seem to be following the bad news, falling with Wall Street when its on a decline and now tracking the Chinese markets," said South China's Gorges. Mainboard turnover fell to HK$57.6 billion ($7.4 billion) from HK$63.9 billion at mid-day on Friday. Shares in Asia's largest wireless carrier China Mobile fell 1.1 percent to HK$99, closing below HK$100 for the fisrt time in nearly a year.
China's largest domestic sportswear brand Li Ning rose 3.5 percent after its chairman lit the cauldron at the Olympic opening ceremony finale. The stock had rallied 3.7 percent on Friday amid talk that China's former star gymnast and chairman of the eponymous company would play a key role at the Olympic opening ceremony. Europe-focused retailer Esprit Holdings slipped 2.5 percent as a weaker euro was expected to hit the company's bottom line.
The China Enterprises Index of top locally listed Chinese firms was 0.8 percent lower, weighed down by the 5.2 percent drop on the Shanghai bourse. The mainland's largest shipping firm China Cosco slipped 3.9 percent. The stock has fallen more than 25 percent since the begining of August, tracking a 23 percent decline in the Baltic Dry Index over a month. Coal stocks slipped on the lower crude oil price.
China Shenhua, the world's most valuable coal miner, fell 3.8 percent while Yanzhou Coal dropped 4.8 percent. Retreating energy prices helped boost power stocks, which had been falling after profit warnings from four major electricity producers. Huaneng Power rose 3.9 percent while China Resources Power surged 8.5 percent on Monday.
Gold miner Zijin Mining fell 4 percent as prices of the precious metal fell to a three-month low on Friday. Gold prices rose on Monday thanks to some bargain hunting. Other metal stocks also fell on retreating global commodity prices and fears of slowing demand in China.