Hong Kong shares have worst day in 3-1/2 mths, China also slumps

Last Updated: Thu, Nov 08, 2012 10:42 hrs

* HSI -2.4 pct, H-shares -2.7 pct, CSI300 -1.8 pct

* Losses came in higher turnover vs Wed, HK highest since Sept 24

* Chinese oil majors under pressure after oil prices dive

* Rail sector bucks weakness, new govt investment expected

By Clement Tan

HONG KONG, Nov 8 (Reuters) - Hong Kong shares suffered their worst loss since July 23 on Thursday, as investors took profits on recent outperformers and refocused their attention on the prospect of U.S. fiscal woes roiling financial markets.

Thursday's pullback came after U.S. President Barack Obama's successful re-election bid helped the Hang Seng Index near 2012 highs on Wednesday, with investors relieved that capital inflows from loose U.S. monetary policy will continue.

The Hang Seng Index dived 2.4 percent to 21,566.9, its worst single-day fall since July 23, reversing the benchmark's strong start to November. The China Enterprises Index of the top Chinese listings in Hong Kong, which outperformed Asian peers in October, sank 2.7 percent.

In the mainland, the CSI300 Index of the top Shanghai and Shenzhen listings suffered a fourth-straight loss, sliding 1.8 percent. The Shanghai Composite Index lost 1.6 percent. Thursday's losses were their worst since Oct. 26.

Losses in both Hong Kong and China markets came in higher volumes than Wednesday. In Hong Kong, turnover was the highest since Sept 24.

"Europe and the fiscal situation in the U.S. are the focus right now, but if the U.S. situation stays under control, the uptrend for Chinese shares, particularly ones listed in Hong Kong, remains intact," said Alan Lam, Julius Baer's Greater China equity analyst.

"But it's still very difficult to look beyond a three- or six-month window at this point, although the next batch of data tomorrow should do more to reassure investors that the slowdown in China is stabilising," he added.

Beijing will post a fresh batch of economic data, starting with inflation, urban investment, industrial output and retail sales on Friday. Trade data is expected on Saturday, with money supply and loan growth at any time between Nov. 10 and Nov. 15.

The data should add to signs of stability in the world's second-largest economy from September's figures, and could spur more interest into Chinese equities.

Some $1.7 billion flowed into China stock exchange-traded funds (ETFs) in October, more than triple September's total and the best since the start of 2011, according to an International Liquidity Review report dated Nov. 7.

Investors are also eyeing the makeup of the new Politburo Standing Committee at the 18th Party Congress meeting that started in Beijing earlier on Thursday for the likely policy approach of China's incoming leaders.


On Thursday, shares of bourse operator Hong Kong Exchange (HKex) slumped 3.8 percent after surging 24 percent in the two months before November.

Macau casino Galaxy Entertainment ended down 4.4 percent at HK$27.35, above the HK$26.17 per share price that private equity Permira priced their $875 million stake sale, which was a 8.5 percent discount to its HK$28.60 closing price on Wednesday.

This follows another successful secondary offering earlier this week for China Merchants Holdings on Monday, which was priced at a 6.6 percent discount, suggesting demand still exists if the discount is sufficient.

This contrasted with a failed Tingyi Holdings share placement on Oct. 16, when an undisclosed shareholder tried to price a $120 million share sale at a 1 to 2.1 percent discount to the previous day's close.

Chinese oil majors came under further pressure after oil prices dived 4 percent overnight on growing economic headwinds on both sides of the Atlantic coast.

In Hong Kong, PetroChina Co Ltd and CNOOC Ltd each fell 3 percent, while China Petroleum & Chemical Corp (Sinopec) lost 1.7 percent.

But the Chinese railway sector bucked broader market weakness after mainland news outlets reported that Beijing could raise its investment in the sector.

China Railway Group rose 2.2 percent in Hong Kong and 1.1 percent in Shanghai.

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