Hong Kong stocks joined a wide slump in Asia on Thursday morning, after the US Federal Reserve raised interest rates and signalled a faster-than-expected pace of policy tightening, making emerging markets less attractive.
Chinese shares, less exposed to global market volatility due to strict capital controls, dropped less sharply than Hong Kong ones. Still, its banking sector plunged amid fears that a dramatic sell-off in the bond market could hurt lenders’ balance sheets.
Hong Kong's Hang Seng index fell 1.7 per cent to 22,076.38 points. If the losses at midday are not pared in the afternoon, the index will close at a four-month low.
The Hong Kong China Enterprises Index lost 2.4 per cent, to hit 9,469.34 points.
Investors were spooked after the US central bank projected three hikes next year, up from two previously, indicating a more aggressive tightening path.
Property leads the decline
The Hong Kong Monetary Authority on Thursday followed the Fed's lead, raising the city's base rate by 25 basis points.
All sectors in the city’s stock market lost ground, with the rate-sensitive property sector leading the decline.
The energy sector in both Hong Kong and China retreated, slipping more than 2 per cent and 1 per cent respectively, in line with sliding oil prices overnight.
In China, the blue-chip CSI300 index fell 0.5 per cent, to 3,361.17 points, while the Shanghai Composite Index lost 0.3 per cent, to 3,131.31 points.
"The Fed's rate hike, rumours about some problems in the bond markets, along with the stock market's recent downward trend, all added to today's loss," said Zhang Qi, a Shanghai-based analyst with Haitong Securities.
Sector performance was mixed in mainland markets, with gains in tech shares cancelled out by losses in financial and energy stocks.
Banking stocks tumbled nearly 2.5 per cent amid an accelerated sell-off in China’s bond market.
Investors found some solace from gains in small-caps. Shenzhen’s start-up board ChiNext was up over 1.5 per cent at midday, on signs that some foreign investors are buying small-caps after that index’s recent weakness.
