On Monday Hong Kong stocks suffered their biggest drop in four months, as worries over China’s new rules to curb margin trading and boost short-selling offset the central bank’s latest move to relax monetary policy and spur economic growth.
The Hang Seng Index HSI declined 2% to close at 27,094.93, down the most since early December. The mainland-China-tracking Hang Seng China Enterprises HSCEI slid 2.9% to 14,111.34, marking its steepest fall in three months.
Over on the mainland, the Shanghai Composite Index SHCOMP ended sharply lower after a volatile session, down 1.6% at 4,217.08. The index had briefly gained 1.1% in the morning session and touched a new seven-year intraday high of 4,356.00. By the end of afternoon trade, all gains were erased.
Sydney’s S&P/ASX XJO fell 0.8%, while Seoul’s Kospi Composite Index SEU edged up 0.2%. Japan’s Nikkei Average NIK inched down 0.1%, and the Topix I0000 was off 0.4%.
The drop in the Asian markets was caused by the move by China's regulators as they unveiled on Friday a raft of measures to curb margin trading, while also allowing fund managers to lend stocks for short-selling and expanding the list of shares which can be sold short, though there was no desire to suppress the stock market, as the regulator outlined later.
On Sunday the People’s Bank of China also made further moves to ease its monetary policy amid the economic slowdown, staging its biggest cut to banks’ reserve requirement ratio in more than six years and releasing about $200 billion in liquidity for banks to lend.
In Hong Kong, brokerage shares sank in the wake of the tighter margin rules, as Haitong International Securities Group Ltd. 0665 slid 10%, China Everbright Ltd. 0165 sagged 9.7%, Shenyin Wanguo HK Ltd. 0218 shed 7.9%, Guotai Junan International Holdings Ltd. 1788, -7.29% declined 7.3%, and Citic Securities Co. Ltd. 6030, -6.95% lost 7%.
In the morning, major Chinese lenders had posted brief gains after the central bank cut the reserve requirement ratio, but those gains were trimmed by the close of trade.
China Minsheng Banking Corp. Ltd. 1988 retreated 4.2%, China Merchants Bank Co., Ltd. 3968 dropped 3.4%, China Citic Bank Corporation Ltd. 0998 fell 3.2%, and Bank of China Ltd. 3988 gave up 2.6%.
The yen USDJPY was slightly higher against the greenback, with the dollar at ¥118.83, compared with ¥118.95 late Friday in New York.
