Hong Kong's benchmark stock index plunged to its lowest level since January, as weak corporate earnings resulting from the year-long US-China trade war took their toll, while a second day of disruptions at the city's airport weighed on sentiments.
The Hang Seng Index closed 2.1 per cent down at 25,291.28, hitting its lowest level since January 3. Smartphone parts maker Sunny Optical Technology was the sole gainer out of the 50 component stocks on the index, closing 0.5 per cent higher at HK$86.40.
Hong Kong's stock market could see a brief recovery when the benchmark gauge falls to the 25,200 level, which is a major support for the index, according to Louis Tse Ming-kwong, managing director at VC Asset Management.
"Those short selling the Hong Kong market will gradually want to square their positions and lock in the gains, and the market will take a breather," he said.
But the temporary recovery would only happen if planned rallies for this weekend do not escalate further, giving institutional investors some confidence that governance is not spiralling out of control in Asia's financial hub.
Weighing on the bourse were shares of Galaxy Entertainment Group, which fell 5.9 per cent to a nine-month low of HK$44.30, after reporting weaker interim results due to the deteriorating trade war. The company, which operates a casino, hotels and other entertainment facilities in Macau, posted a 6 per cent decline in first-half revenue to HK$26.22 billion, while net profit fell 7.4 per cent to HK$6.68 billion.
China Literature Limited, the country's largest online publisher and backed by social network operator Tencent Holdings, lost 17.8 per cent to a record low of HK$24. The Shanghai-based company's net profit fell 22.4 per cent due to an increase in financing costs, and rising expenses for sales, marketing and administration.
Weaker corporate earnings are exerting more pressure on market sentiments that are already weak, said Francis Lun, chief executive of Geo Securities, who expects the Hang Seng to drop to 24,000 before finding any support.
Cathay Pacific Airways, the city's hometown carrier, extended its declines after falling to a 10-year low yesterday, as the Hong Kong airport cancelled most flights for a second day after thousands of protesters laid siege to facilities. The stock fell 2.6 per cent to HK$9.55 while its parent Swire Pacific dropped 1.8 per cent to HK$75.35.
Airports in the Greater Bay Area near Hong Kong benefited from Hong Kong's woes, as hundreds of inbound flights were diverted to neighbouring airfields.
Shenzhen Airport, operator of the airfield in China's technology hub and home to such technology giants as Tencent and Huawei Technologies, rose by its 10 per cent daily limit to a four-year high of 10.43 yuan. Guangzhou Baiyun International Airport, one of the country's first listed airport operators, rose 4.4 per cent to 21.22 yuan on the Shanghai exchange.
On the mainland, the Shanghai Composite fell 0.6 per cent to 2,797.26, while the CSI 300 of large caps in Shanghai and Shenzhen lost 0.9 per cent to 3,665.76, both reversing Monday's gains.
Banks extended 1.06 trillion yuan (US$150.06 billion) in new loans in July, below expectations of analysts polled by Reuters, who expected new loans to fall to 1.25 trillion yuan, from 1.66 trillion yuan in June. The fewer loans raise pressure on the central bank to further ease policy and support a slowing economy.
Gold was one of the few sectors that bucked a decline in the broader market.
Shandong Gold Mining rose 8.4 per cent and Zhongjin Gold gained 5.1 per cent. Lingbao Gold Group Company saw its biggest daily gain since December 2015, of 18.6 per cent, while China Gold International Resources rose the most in a day since April 2015, by 12.4 per cent.
Bullion prices are trading close to their highest in six years, as the ongoing protest and continued US-China trade war rattle global financial markets, spurring demand for safe assets.
Additional reporting by Daryl Choo
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