Hong Kong shares closed broadly lower on Tuesday following sluggish global manufacturing data that renewed growth concerns, which crimped turnover and could limit any lift from coming first-half earnings reports. The slowdown in the US factory sector added to data from Europe and China showing manufacturing activity expanded at its weakest rate in two years. Meanwhile, the nearly-in-hand US debt ceiling deal offered scant relief.
The Hang Seng Index closed down 1.1 percent at 22,421.5 points, dragged by Chinese names listed in Hong Kong also known as H-shares. The China Enterprise Index slumped 2.1 percent. Near-term resistance on the Hang Seng is seen at a downward trend line connecting the highs from its April peak, with the June low of 21,508 seen offering support. Chinese banks suffered amid the broader pessimism. First-half earnings reports, due out in mid-August and expected to be good, are unlikely to push up stock prices given the uncertain growth outlook but should form a steady base for full-year performance, analysts said.
"Unfortunately the whole world hates bank stocks right now," said Jim Antos, Mizuho Securities' ex-Japan bank analyst. Industrial and Commercial Bank of China was among the biggest percentage losers among benchmark components, further hit after Goldman Sachs sold HK$3.73 billion ($478.7 million) worth of shares. Analysts said this sell-off was unlikely to spill over to other Chinese banks since this is a fraction of one of the world's largest banks and more a reflection of the state of the selling party rather than ICBC itself.
Helping limit losses on the day was HSBC Holdings Plc, gaining for a second-straight session after it reported first-half profits that were better than expected and announced it would axe 30,000 jobs. Europe's largest bank and the Hang Seng's biggest single weight gained 1.2 percent in volumes more than double its 30-day average as turnover stayed thin in the broader market. After the bank's Kong share price hit a one-year low in mid-July, it has rebounded more than 4 percent.
The Shanghai Composite Index hit its lowest in almost six weeks on Tuesday, closing down 0.9 percent at 2,679.3 points as A-share turnover stayed low, totalling almost 25 percent below its 20-day average. Sluggish global manufacturing data on Monday re-ignited growth concerns in the world's second-largest economy even as the Chinese central bank said inflation remained stubbornly stuck near a three-year high.
"The market seems to be spooked by the prospect of further rate hikes especially ahead of the next slew of economic data in the next week," said Guo Yanling, an analyst with Shanghai Securities. Oil giants PetroChina Co Ltd and Sinopec Corp were among the biggest benchmark drags. The Shanghai energy sector index gained 0.7 percent largely on the back of surging coal plays on anticipated higher demand.