Hong Kong stock market tumbles most in eight months

Bloomberg

Hong Kong stocks sank the most since November as profit taking in some of the city’s top performing shares sparked a wider selloff. The Hang Seng Index dropped as much as 2.1 percent before paring declines to 1.5 percent at the close. Tencent Holdings Ltd., Galaxy Entertainment Group Ltd. and Geely Automobile Holdings Ltd. were the biggest losers on the gauge, sinking at least 3.5 percent. All but five stocks on the 50-member measure declined.
Tencent alone accounts for more than a quarter of the Hang Seng Index’s 15 percent advance this year, as investors piled into China’s largest Internet company. The benchmark equity gauge has lost momentum in the past month as it struggled to sustain gains above the 26,000 level. Analysts attributed the deepening of Tuesday’s slump to selling of index futures after the measure fell below 25,500. “Many investors were betting 25,500 was the supporting level for the Hang Seng Index and have bought lots of futures on it. As the index fell below that level this morning, some people panicked and chose to sell their holdings,” said Kenny Wen, a strategist at Sun Hung Kai Financial Ltd. in Hong Kong.
Tencent’s 4.1 percent slide pared its gain this year to 42 percent. The People’s Daily blasted the company’s most profitable smartphone title in an editorial, citing it as an example of how addictive games spread “negative energy” and have even led to deaths.
“Tencent is a leading stock, which is big and has been very profitable for all investors,” said Ben Bei, director of Hong Kong and China strategy at CIMB Securities Ltd. “People need to think about other positive news to lift the market higher. Over the past one to two weeks the market has started to consolidate. Then it cannot break upward, so some people will take profits.”
The selloff comes amid growing concerns about risks in the world’s fourth-largest equity market after a series of spectacular stock plunges. China Huishan Dairy Holdings Co. fell 85 percent in a single day in March, while a string of small cap shares collapsed last month to erase $6 trillion. Volume in Hang Seng Index futures was 65 percent higher than the five-day average for the morning session, with activity spiking as the market sold off toward the break. There was “a lot” of “technical selling of stock futures” once the gauge fell below 25,500 and 25,600, which “lots of index futures are tied to,” said Steven Leung, executive director at UOB Kay Hian (Hong Kong) Ltd.