Hong Kong shares suffered their worst loss in seven weeks on Monday, dragged by a 3 percent slump in China Mobile after it posted underwhelming March subscriber numbers after markets closed last Friday. The Hang Seng Index ended down 1.8 percent at 20,624.4, its biggest drop in a day since March 6.
The benchmark broke below chart support seen at 20,751, the 23.6 percent Fibonacci retracement of its rise from the October 2011 lows to its February 2012 highs. Mainland markets briefly pared gains after a preliminary survey of manufacturing activity in April showed signs of stabilization in China's factories, but eventually closed near the day's lows. The China Securities Index 300 Index and the Shanghai Composite Index each slipped 0.8 percent, with A-share turnover in Shanghai at the highest since March 15.
This contrasted with Hong Kong, where the turnover was the fourth-lowest this year. It is likely to stay weak this week as investors await quarterly earnings from Chinese companies and economic data from major economies in the world. China Mobile had jumped 3.2 percent last week. After markets closed on Friday, the mainland's leading mobile operator said total subscribers rose to 667.2 million, an increase of 5.8 million, according to Reuters calculations. The company also reported first-quarter earnings on Friday that were largely in line with expectations.
China Mobile's Friday close at HK$87.45 was also the level the stock closed on March 12, forming a "double top" on the charts, a bearish sign suggesting the stock could be capped at that level. Chongqing Rural Commercial Bank, the first Chinese bank to post quarterly earnings, slumped 4.4 percent in more than twice its 30-day average volume despite earnings that were above expectations.
While it reported improving asset quality with a decrease in both non-performing loans and non-performing loan ratios, the bank also posted a rapidly declining capital ratio, down 52 basis points after a 107 basis point dip in 2011, according to Barclays Capital. Chinese bank stocks were weak both in Hong Kong and mainland markets on Monday, ahead of quarterly earnings expected this week, with Industrial and Commercial Bank of China (ICBC) down 0.7 percent in Shanghai and 2.5 percent in Hong Kong.
Mainland Chinese markets were further hit by fresh delisting guidelines for the small start up companies listed on the ChiNext board, on the Shenzhen Stock Exchange, a move aimed at improving listings quality and protecting investors. The CSI500 Index, a gauge for small- and medium-cap listings, was an underperformer, down 1.2 percent. The Shenzhen Composite Index lost 1.8 percent.