Hong Kong stocks slumped on Wednesday pushing the benchmark to its lowest level in more than two years as some outperformers were hit by profit-taking, with funds seeking to lock in gains as the outlook for the market turns increasingly bearish.
The Hang Seng Index was down 1.34% at 18,775.39 by the midday trading break after opening in positive territory, the first benchmark in Asia ex-Japan to break below the Aug. 9 low.
Insurers and Macau casino counters, sectors that had held up this year, joined cyclical sectors such as materials in the leg-down on Wednesday, suggesting skittish investors were looking to protect gains where they could.
"We are going on a curve that is going down," said Tanrich Securities vice-president for equity sales Jackson Wong. "The Hong Kong market does not seem convinced by Europe, not even with China's reported plan to buy European debt."
Premier Wen Jiabao said on Wednesday that China remained willing to invest in Europe , but investors were not persuaded, fearing the failure of European leaders to act decisively on the euro zone's debt problems could spiral into a deeper banking crisis.
AIA Group Ltd was down 4.5%, the top loser among Hang Seng Index components and its top drag. Sands China Ltd lost 2.9%, while Galaxy Entertainment Group Ltd was down 2.3%.
The Hang Seng Composite Index for Materials was down 3.63%, with Jiangxi Copper Co Ltd shedding 4.8% to the lowest since October 2010.
MATERIALS LEAD SHANGHAI LOWER IN THIN TURNOVER
The Shanghai Composite Index pared early gains to sink to the lowest since July 2010. It shed 0.5% to 2,458.4 points, weighed down by cement issues as A-share turnover at midday sank to the lowest this year.
Investors remained cautious after Premier Wen affirmed China's tight monetary policy despite data showing inflation falling in August from a three-year high.
"It's not just a lack of interest, it's a lack of liquidity in the market," said Cao Xuefeng, head of research at Huaxi Securities in Chengdu. "As long as investors are not certain monetary policy will relax, I don't think they will be willing to come back into the market."
Growth concerns hit cyclical stocks hardest. The Shanghai materials sector index underperformed, losing 0.9%. Anhui Conch Cement Co Ltd shed 4.4%, hitting its lowest since late January this year.
