Analysts say Hong Kong stocks may regain some momentum when the mainland central bank further cuts interest rates and reduces banks' reserve-requirement ratios, but expectations of the policy stimulating the city's stocks are not high. Parker Zheng / China Daily

Market continues three-week losing streak with 419-point slump on Greek bailout standoff and US rate-hike woes

Continuing a losing streak in the past three weeks, Hong Kong stocks tumbled 1.5 percent on Monday in tandem with most Asian markets that were clouded by the worsening Greek debt crisis and the prospect of a US interest-rate hike.

Dragged down by a slump in financial stocks, the Hang Seng Index lost 418.7 points to close at 26,861.8. The benchmark indicator has tumbled a total of 3.45 percent, or nearly 960 points, since May 26 despite occasional spurts.

In Monday's trading, financial stocks, unsurprisingly, took the heaviest beating. Losers include China Vanke Co Ltd, which slumped 3.94 percent to HK$19.98. China Merchants Bank Co Ltd retreated 3.79 percent to HK$24.1 and Haitong Securities Co Ltd declined 4.76 percent to HK$7.4.

Stock analysts said the failure to reach an agreement in talks between the Greek government and its creditors had intensified Asian investors' worries about the dire consequences that a default would have on the global economy.

Investor sentiment was further depressed by the possibility of an interest-rate hike by the US Federal Reserve (Fed) which is due to meet on Tuesday.

"The possibility of the Fed raising interest rates in June cannot be ignored although the market had earlier expected the increases to happen in August," said Kingston Lin King-ham, general manager of AMTD Asset Management Ltd.

Chinese mainland stocks also took a hit on Monday, with the biggest loss in two weeks.

The benchmark Shanghai Composite Index fell 2 percent to 5,062.99 amid growing concern that the flood of new shares could drain the market of liquidity, at least temporarily. Investors were also distracted by rumors that the securities regulator would introduce tougher measures to clamp down on margin trading.

In Hong Kong, stock analysts said Monday's decline was exacerbated by disappointment that the expected announcement of the Shenzhen-Hong Kong stocks cross-trading link did not materialize. Such an expectation, analysts said, was the major factor in pushing the index up 1.4 percent last Friday.

The lack of details on the link, as announced at the weekend, appeared to have disappointed many investors, triggering a sell-off on Monday.

Lin and others predicted that the Hang Seng Index will sink further to 26,000 in the next few days, almost 3.2 percent lower than Monday's close.

Castor Pang, Core Pacific-Yamaichi's head of research in Hong Kong, expected the launch of the Shenzhen-Hong Kong Stock Connect to boost Hong Kong stocks. But he said he believed the program is unlikely to be introduced before the third quarter of this year.

Lin said Hong Kong stocks may regain some momentum when the mainland central bank further cuts interest rates and reduces banks' reserve-requirement ratios, but he didn't have high expectations of the policy to stimulate the city's stocks.

celia@chinadailyhk.com

(HK Edition 06/16/2015 page9)