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Hong Kong Stocks Sink Most Since ’11 on China, Greece Double Hit
Perspective | 06 July 2015

Hong Kong stocks sank toward their steepest drop since 2011 amid speculation Chinese investors were shifting money out of the city’s market and as Greece’s rejection of austerity measures spurred equity declines across Asia.

Hong Kong Exchanges & Clearing tumbled 12 percent as of 1:33 p.m., on course for its biggest decline since October 2008, after Goldman Sachs Group recommended selling the shares.

Haitong International Securities Group slid 21 percent as mainland brokerages slumped. Internet company Tencent Holdings fell 7.5 percent, dragging the city’s benchmark equity index lower.

The Hang Seng Index dropped 4.9 percent to 24,781.51, set for its worst loss since November 2011, on volume more than double its 30-day intraday average. The Hang Seng Index is down more than 12 percent from its recent high on April 28 and is headed for a so-called correction.

The Hang Seng China Enterprises Index fell 5.4 percent. China’s Shanghai Composite Index of mainland stocks, known as A shares, fell 0.2 percent, reversing gains of as much as 7.8 percent.

“Chinese investors are selling the Hong Kong market to channel the money back to A shares,” said Louis Tse, a Hong Kong-based director at VC Brokerage Ltd.

“Investors anticipate more measures to support mainland shares. Realistically, it’s obvious that Hong Kong will lose out.”

The Hang Seng Index fell 4.5 percent in the three weeks through July 3, compared with a 29 percent dive by the Shanghai measure.

Chinese authorities responded to the continuing rout by suspending initial public offerings and providing liquidity for margin trading.

The Hang Seng China AH Premium Index jumped 10 percent on Monday, heading for the biggest increase since May 2006. The gauge signals dual-listed shares are 35 percent more expensive on mainland exchanges than in Hong Kong.

Greek Vote

Hong Kong stocks, which are freely traded by foreign investors and more susceptible to global sentiment than mainland shares, also fell after Greek voters said no to austerity.

Sixty-one percent backed Prime Minister Alexis Tsipras’s rejection of further spending cuts and tax increases in an unprecedented referendum that’s also taken the country to the brink of financial collapse.

The results mean Greece exiting the currency union is now the base scenario, JPMorgan Chase & Co said.

Futures on the Standard & Poor’s 500 Index lost 1.1 percent and Asia’s benchmark equity gauge fell 2.3 percent, poised for the biggest drop since February 2014.

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