Hong Kong Stocks Drop to One-Week Low as Brexit Concern Returns

(Bloomberg) -- Hong Kong stocks fell to a one-week low, joining a global selloff spurred by renewed concern that Britain's exit from the European Union will weigh on world economic growth. HSBC Holdings Plc fell.

The Hang Seng Index dropped 1.2 percent at the close in Hong Kong, with London-based lender HSBC among the biggest drags on the benchmark. Bank of England chief Mark Carney warned that risks from the Brexit vote had started to crystallize, while the monetary authority took steps to spur lending by reducing capital requirements for banks. The Shanghai Composite Index rose, closing above the 3,000 level for a second day as Kweichow Moutai Co. helped push the gauge higher.

“Investors are still risk averse -- they're afraid about the global economic slowdown" after Carney's comments, said Sam Chi Yung, senior strategist at South China Financial Holdings Ltd. “There is still the expectation of an interest-rate cut in China, so A share performance is relatively better than Hong Kong. Hong Kong is a more open economy, so it's affected by the global market."

Prada, Hutchison

Europe-exposed shares declined in Hong Kong, with Italian luxury-goods maker Prada SpA losing 3.7 percent and CK Hutchison Holdings Ltd. retreating 0.7 percent. HSBC lost 1.2 percent, while Standard Chartered Plc fell 1.5 percent. The Hang Seng Index dropped to 20,495.29, while the Hang Seng China Enterprises Index, a measure of Chinese companies traded in the former British colony, retreated 1.6 percent.

The Shanghai Composite Index climbed 0.4 percent at the close, sending its relative-strength index to 68.3, the highest since November. The stocks gauge closed above 3,000 on Tuesday for the first time since April amid speculation that the People's Bank of China will take steps to boost the economy. The PBOC is likely to fine-tune monetary policy in the second half with targeted reserve-requirement-ratio cuts or possibly across-the-board reductions, according to a commentary in the state-run China Securities Journal.

Inching Up

The Shanghai Composite, the world's worst performer among 94 global indexes in the first five months of the year, is edging up the rankings due to its relative isolation from the Brexit fallout. With a 15 percent drop in 2015, the benchmark ranks 85th, and Italian and Japanese equities are posting the biggest global declines. Data released last week showed a slowdown in Chinese manufacturing and industrial profits, while figures due next week are forecast to indicate a third monthly drop in exports.

Kweichow Moutai advanced 5.5 percent to become the biggest contributor to the Shanghai equity index's advance. Goldman Sachs Group Inc. boosted its 12-month price target to 331.69 yuan vs 302.47 yuan on strong demand for the premium liquor the company makes.

The Hang Seng China AH Premium index, which measures the price gap between shares listed on the mainland and in Hong Kong, widened for a third day. The premium of mainland-traded shares over their Hong Kong counterparts rose to 35 percent, the biggest since June 17.

China Resources Beer Holdings Co., the maker of the Snow brand of beer, fell 4 percent in Hong Kong, after saying it plans to raise HK$9.5 billion ($1.2 billion) in a share sale to help finance the purchase of a remaining stake in a Chinese venture with SABMiller Plc.

To contact the reporter on this story: Kana Nishizawa in Hong Kong at knishizawa5@bloomberg.net. To contact the editors responsible for this story: Robin Ganguly at rganguly1@bloomberg.net, Philip Glamann