Chinese investors sell record Hong Kong stocks as Tencent stings

Bloomberg

Chinese investors have dumped Hong Kong stocks at a record clip this month, as the city’s equity benchmark tumbled to its lowest in a year.
Mainland investors sold net HK$25.4 billion ($3.2 billion) of Hong Kong equities in August through Tuesday, according to Bloomberg calculations based on daily turnover data. That’s the biggest monthly selling figure since China opened its first exchange link with the city in late 2014. Tencent Holdings Ltd. alone accounted for over half of the sales, as the Chinese technology giant reported its first profit drop in a decade.
Flows into Hong Kong stocks have waned as US-China trade tension pulled investors away from riskier assets, while deleveraging measures squeezed liquidity and the yuan’s weakness hurt sentiment. Mainland investors became monthly net sellers from April through June, a record streak, before a small rebound in July. Then lackluster results from heavyweights like Tencent and China Life Insurance Co. darkened the mood again.
The Hang Seng Index hit its lowest in a year on August 16 after Tencent posted its earnings and extended a five-day slump to 13 percent. The Hong Kong benchmark added 0.2 percent on Wednesday, while Tencent dropped 1.3 percent.
“Poor earnings served as a catalyst for outflows,” said Linus Yip, strategist with First Shanghai Securities Ltd. “The market was subject to profit-taking after gains last year and sentiment turned cautious in the past few months. Selling pressure got bigger with stock darlings like Tencent being brought down.”
Mainland investors sold net HK$14.1 billion Tencent shares this month, according to Bloomberg calculations based on shareholding data from the local exchange. That’s the smallest in about a year and compares with a 1.8 percent stake at the start of this year.
The Shenzhen-based company, which contributed to a quarter of the Hang Seng Index’s 36 percent gain last year, has lost $133 billion in market value since its January peak amid concerns over slowing growth at its gaming unit and regulatory uncertainty.