Hong Kong Stocks’ Sudden Tumble Catches Traders Off Guard

(Bloomberg) -- Friday's sudden tumble in Hong Kong stocks spread to the onshore market, with selling accelerating amid nervousness over a lack of clear triggers for the slump.

The market was rife with speculation: health-care shares tumbled in Hong Kong when a document circulating on social media suggested Beijing could add dozens of new drugs to another round of procurement. Others said there was too much macro risk going into the weekend, with increasing uncertainty on the trade-war front. In onshore trading, the selling accelerated in the afternoon session as investors took profits in crowd favorites like Kweichow Moutai Co.

The Hang Seng China Enterprises Index lost 2.5%, while the FTSE China A50 Index of onshore-listed large caps fell 1.3%. Hong Kong's Hang Seng Index dropped 2% on volume that was 36% higher than the 30-day average. Some traders said Thursday's U.S. holiday meant investors lacked cues in Friday's Asian session.

“There's no obvious trigger” for Friday's weakness, said Linus Yip, a Hong Kong-based strategist with First Shanghai Securities Ltd. He said continued uncertainty over the outcome of U.S.-China trade negotiations could be one factor weighing on sentiment.

There's persistent concern over how China may retaliate against a U.S. bill on Hong Kong signed by Trump this week. Beijing on Thursday reiterated its threat to take action, without elaborating. Chinese authorities have been known to make significant announcements late on Friday. Month-end maneuvering was also seen as a possible factor.

Hong Kong stocks rose Monday after pro-democracy candidates swept the board in district council elections, putting pressure on the city's government to address issues that have fueled months of protests. Days later, Trump signed a bill into law expressing support for Hong Kong's protesters.

Moutai fell 4% Friday, its biggest loss since Sept. 11. CSPC Pharmaceutical Group Ltd. and Tonghua Dongbao Pharmaceutical Co. almost 10%, among the biggest laggards on the MSCI China Index.

To contact the reporter on this story: Cindy Wang in Taipei at hwang61@bloomberg.net

To contact the editors responsible for this story: Sofia Horta e Costa at shortaecosta@bloomberg.net, Richard Frost

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