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Shanghai - Hong Kong stocks dropped the most in two weeks as energy explorers weighed on the market after Cnooc Ltd. reported a slump in third-quarter sales.
The Hang Seng Index fell 1.2% at 08:23, the biggest drop since October 13. Cnooc, China’s biggest offshore oil and gas producer, lost 3.1% after posting a 15% fall in third-quarter sales as output declined with capital spending.
A gauge of Chinese companies listed in Hong Kong slipped 1.5%, with China Petroleum & Chemical and PetroChina slipping at least 2.4%. On the mainland, the Shanghai Composite Index fell for a second day after reaching a nine-month high earlier in the week.
The earnings season for Hong Kong and Chinese companies is gathering pace, with Bank of China, the first of China’s big lenders to publish its third-quarter results, reporting on Wednesday that its net interest margin narrowed as it eked out another gain in profit.
Chinese industrial companies posted 7.7% growth in earnings in September from a year earlier, official data showed on Thursday, slowing from 19.5% a month earlier.
"Most third-quarter corporate earnings aren’t looking good because the whole economy is lackluster,” said Zhang Haidong, chief strategist at Jinkuang Investment Management in Shanghai. "Given the current economic scenario, earnings outlook isn’t likely to be optimistic next year either."
The Hang Seng Index traded at 23 053.5. The Shanghai Composite lost 0.3%. The Hang Seng China Enterprises Index dropped to 9 552.28.
Slow flow
The Hong Kong stock gauge has slipped 4.3% since reaching this year’s high in September as inflows through an exchange link with Shanghai slowed to about $1bn so far in October, from a record $8bn last month.
Rising odds of a Federal Reserve interest-rate increase have also weighed on equities in Hong Kong, with the city’s currency peg to the dollar linking its monetary policy to that of the US.
"People are a bit concerned about the decrease in southbound flows, so sentiment is a little bit impacted," said Ben Bei, an analyst at CIMB Securities in Hong Kong. "We see an increase in risk from the US side from now till year-end, so sentiment is turning a bit cautious."
Bank of China fell 1.3% in Hong Kong. While the country’s biggest banks have managed to keep profits increasing every year since 2004, rising bad loans and pressure on lending margins are making the task harder. For the full year, the country’s five largest lenders are projected to post a 2% decline in their combined net income, according to analysts surveyed by Bloomberg.
Industrial & Commercial Bank of China dropped 1.3% in Hong Kong, while Bank of Communications retreated 1.3%.
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