Shanghai at four-year low; Hang Seng down as Tencent plunges

Pedestrians cross a road in the Central district of Hong Kong. (Bloomberg pic)

HONG KONG: A sell off in Hong Kong and Chinese shares deepened following a slump in US equities amid persistent concerns about a trade war.

The Hang Seng Index sank 3.8%, falling below the 26,000 support level, with every member of the gauge declining. Tencent Holdings Ltd., the most valuable stock listed in Asia, slid 7.3% and was in line for its biggest loss since October 2011.

The Shanghai Composite Index slumped 4.3% to its lowest in four years. The yuan fell 0.1% to its weakest since Aug 15.

The benchmark Hong Kong equity gauge has tumbled 16% this year as fears of a trade war between the US and China spurred an exodus from what was the world’s best performing market as recently as January.

Valuations are plummeting, with the price to earnings ratio falling into single digits this week for the first time in more than two years.

“The next key support would be 24,000,” said Daniel So, a Hong Kong-based strategist with CMB International Securities Ltd. “In the short term there could be a technical rebound led by old economy stocks because they would be beneficiaries from policy support from China.”

The Hang Seng Index was at 25,192 points at 11.34am. Selling pressure is likely to increase as Hong Kong’s easy money era ends and worsening tensions between Beijing and Washington make investors more jittery.

The HSI Volatility Index jumped 20%, the most since June 19.

BAIC Motor Corp. was one of Thursday’s biggest decliners in Hong Kong, heading for its worst ever loss on concern Mercedez-Benz AG may raise its stake in the company.

A crackdown at Chinese borders on undeclared goods hurt luxury goods companies, with Prada SpA tumbling the most in 13 months. Battery makers sank, as Jiangxi Ganfeng Lithium Co. dropped as much as 28% on its trading debut.