Hong Kong - Hong Kong stocks declined, paring a monthly gain, as financial and energy companies slumped.
The Hang Seng Index fell 0.6% as of 08:30, trimming its advance in September to 2%. Bank of Communications slid, while Kunlun Energy headed for its biggest loss in more than a month after crude oil declined overnight in New York.
The Shanghai Composite Index retreated 0.3%. Postal Savings Bank of China shares added 0.2% after a $7.4bn initial public offering that was the world’s biggest since ecommerce giant Alibaba listed in 2014.
Hong Kong stocks have rallied this quarter, buoyed by mainland inflows via an exchange link with Shanghai and as traders scaled back bets for higher US borrowing costs.
Daily southbound flows into the city’s equities have totaled a net 56.5 billion yuan this month, compared with 1.86 billion yuan of Shanghai share purchases. That’s driven a valuation gap between dual-listed shares in Hong Kong and Chinese exchanges to near the narrowest since 2014.
"Net buying by mainland investors will probably continue in the fourth quarter due to demand for Hong Kong dollar-related assets to hedge against the yuan’s devaluation," said Wang Zheng, Shanghai-based chief investment officer at Jingxi Investment Management.
"Northbound buying isn’t likely to pick up any time soon as there’s no good target to buy for overseas investors because of higher valuations."
Mainland investors
The Hang Seng Index fell to 23 426.78. The Hang Seng China Enterprises Index of mainland companies traded in Hong Kong retreated 1%.
Mainland investors continued to be net buyers of Hong Kong stocks through the Shanghai link on Wednesday, while overseas investors sold mainland shares. The link will be closed from Thursday in the run up to holidays on the mainland that will shutter onshore financial markets for the whole of next week.
Trading remained light, with China’s CSI 300 Index seeing volumes 55% less than its 30-day average at the time of day, according to data compiled by Bloomberg. The Hang Seng Index traded on volume that was 25% reduced.