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Wednesday 8 October 2008
HK Index Plunges to its Biggest Fall in Nine Months
Hong Kong shares plunged 8.2 per cent on Wednesday, their biggest drop in 9 months, sending valuations to levels last seen during the Asian financial crisis as dismayed investors reacted to the looming threat of a global recession. PDF
HK Index Plunges to its Biggest Fall in Nine Months
Reuters 8 October 2008
Hong Kong shares plunged 8.2 per cent on Wednesday, their biggest drop in 9 months, sending valuations to levels last seen during the Asian financial crisis as dismayed investors reacted to the looming threat of a global recession.
“This is an example of when people decide to see what happens if everybody sells and moves to cash,” said Benjamin Collett, head of hedge fund sales at Daiwa SMBC.
“Under normal circumstances the cheap valuations should trigger a rebound but this is a very difficult market to trade in because you are not in it for profit or loss but to keep your job.”
Only 35 of the 1,087 traded issues were in the black on Wednesday morning as the local market played catch-up with the rout in global equities, after Tuesday's holiday.
Shares shrugged off news that Hong Kong's monetary authority was slashing its main interest rate by up to 100 basis points, the biggest cut since the benchmark started a decade ago, as central banks around the world stepped up efforts to halt a growing credit crunch that is hammering financial markets.
The benchmark Hang Seng Index closed down 1372.03 points at 15,431.73, its lowest level since June 2006.
Brokers expect the blue-chip index to slide till it hits 15,000 points, a level that some say could trigger a sharp rebound.
Mainboard turnover was HK$77.8 billion as compared with HK$47.33 billion on Monday. Tuesday was a holiday in Hong Kong.
“It has been a funny bear market. While stocks have fallen 39 per cent in Asia this year, economic growth, exports and earnings all look fairly robust. Unfortunately, that is about to change,” said Garry Evans, head of Asia-Pacific equity strategy with HSBC.
“As global growth slows, so will Asian exports, GDP growth and earnings. With valuations perhaps 15-20 per cent above rock-bottom levels, Asian stock markets are likely to fall for another quarter or two,” he said.
Historic valuations of blue-chip stocks are at 9.4 times their price to earnings, a level last seen during the Asian markets' sell-off in 1998.
The China Enterprises Index of top locally-listed mainland companies plummeted 11.5 per cent to 7,452.74, a two-year low.
Energy and other resource stocks were mauled by concern over slowing demand while financials were beaten down by the still-raging credit market crisis and talk of another lending rate cut in mainland.
Asia's largest oil & gas producer PetroChina fell per cent 14.1 while offshore specialist CNOOC slumped 14.3 per cent.
Shares in Aluminum Corp of China dropped 19.8 per cent after mainland's largest aluminium producer cut alumina prices for the third time since June and warned investors of a more than 50 per cent slide in its third-quarter profit.
Top lender ICBC fell 8 per cent and China Construction Bank plummeted 12.4 per cent.
Shares in China Communications Services were among the top percentage decliners of the morning, skidding 32.5 per cent on concern over lower telecom industry spending.
Mainland regulators have asked its telecom operators to share their networks to minimise costs and enhance competition. But the move could be detrimental to China Communications, which was expected to land much of the substantial investments in the sector, post-restructuring.
Industry peer ZTE Corp also dropped 24.5 per cent after Merrill Lynch cut its rating on the stock to underperform from buy, citing intensified competition from rival Huawei.
Asia's largest wireless carrier and a Hang Seng Index heavyweight, China Mobile plunged 8.4 per cent, cementing the decline on the main index.
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HK Index Plunges to its Biggest Fall in Nine Months
Reuters
8 October 2008
Hong Kong shares plunged 8.2 per cent on Wednesday, their biggest drop in 9 months, sending valuations to levels last seen during the Asian financial crisis as dismayed investors reacted to the looming threat of a global recession.
“This is an example of when people decide to see what happens if everybody sells and moves to cash,” said Benjamin Collett, head of hedge fund sales at Daiwa SMBC.
“Under normal circumstances the cheap valuations should trigger a rebound but this is a very difficult market to trade in because you are not in it for profit or loss but to keep your job.”
Only 35 of the 1,087 traded issues were in the black on Wednesday morning as the local market played catch-up with the rout in global equities, after Tuesday's holiday.
Shares shrugged off news that Hong Kong's monetary authority was slashing its main interest rate by up to 100 basis points, the biggest cut since the benchmark started a decade ago, as central banks around the world stepped up efforts to halt a growing credit crunch that is hammering financial markets.
The benchmark Hang Seng Index closed down 1372.03 points at 15,431.73, its lowest level since June 2006.
Brokers expect the blue-chip index to slide till it hits 15,000 points, a level that some say could trigger a sharp rebound.
Mainboard turnover was HK$77.8 billion as compared with HK$47.33 billion on Monday. Tuesday was a holiday in Hong Kong.
“It has been a funny bear market. While stocks have fallen 39 per cent in Asia this year, economic growth, exports and earnings all look fairly robust. Unfortunately, that is about to change,” said Garry Evans, head of Asia-Pacific equity strategy with HSBC.
“As global growth slows, so will Asian exports, GDP growth and earnings. With valuations perhaps 15-20 per cent above rock-bottom levels, Asian stock markets are likely to fall for another quarter or two,” he said.
Historic valuations of blue-chip stocks are at 9.4 times their price to earnings, a level last seen during the Asian markets' sell-off in 1998.
The China Enterprises Index of top locally-listed mainland companies plummeted 11.5 per cent to 7,452.74, a two-year low.
Energy and other resource stocks were mauled by concern over slowing demand while financials were beaten down by the still-raging credit market crisis and talk of another lending rate cut in mainland.
Asia's largest oil & gas producer PetroChina fell per cent 14.1 while offshore specialist CNOOC slumped 14.3 per cent.
Shares in Aluminum Corp of China dropped 19.8 per cent after mainland's largest aluminium producer cut alumina prices for the third time since June and warned investors of a more than 50 per cent slide in its third-quarter profit.
Top lender ICBC fell 8 per cent and China Construction Bank plummeted 12.4 per cent.
Shares in China Communications Services were among the top percentage decliners of the morning, skidding 32.5 per cent on concern over lower telecom industry spending.
Mainland regulators have asked its telecom operators to share their networks to minimise costs and enhance competition. But the move could be detrimental to China Communications, which was expected to land much of the substantial investments in the sector, post-restructuring.
Industry peer ZTE Corp also dropped 24.5 per cent after Merrill Lynch cut its rating on the stock to underperform from buy, citing intensified competition from rival Huawei.
Asia's largest wireless carrier and a Hang Seng Index heavyweight, China Mobile plunged 8.4 per cent, cementing the decline on the main index.
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