Hong Kong stocks tumbled 3 percent to a two-year low on Tuesday, with the benchmark Hang Seng Index down to 20,556 points, as growing concerns about a sharp slowdown of global economic growth and weaknesses in commodity prices continued to rattle investors. Edmond Tang / China Daily

Hong Kong stocks tumbled on Tuesday in tandem with a sell-off in global and Asian equity markets, with the city's benchmark Hang Seng Index (HSI) heading for a nearly two-year low.

The falls were triggered by a combination of heightened jitters over the slowdown in the Chinese economy after mainland industrial firms reported their lowest profits in four years, an imminent US interest-rate hike, and weaknesses in commodity prices.

The HSI plunged 629.72 points, or 2.97 percent, to close at 20,556.60, while the Hang Seng China Enterprises Index fell 2.96 percent to 9,230.50. The market turnover on the main board of the Hong Kong Stock Exchange reached HK$84.033 billion.

Castor Pang, head of research at Core Pacific Yamaichi Hong Kong, said Hong Kong stocks have continued to weaken amid growing downward pressure on the Chinese mainland economy.

According to the latest data from the National Bureau of Statistics of China, mainland industrial firms' profits declined further in August - slumping by 8.8 percent from a year earlier. The biggest drops were focused on coal, oil and metals producers. It was the steepest decline since the central government began releasing monthly data in October 2011.

"The Chinese economy is worsening, and the downward trend is hard to stop," said Pang.

He warned that there are no signs in both the domestic and global markets that Hong Kong stocks will recover in the coming months.

The HSI, he said, may fall below the 20,000-point barrier if US stock markets stay sluggish, with the Chinese mainland bourses due to be closed for five trading days from Thursday for the National Day break.

The Dow Jones Industrial Average dropped 312.78 points, or 1.9 percent, on Monday to 16,001.89, dipping below 16,000 for the first time since Sept 1 on an intraday basis. The S&P 500 fell 49.57 points, or 2.6 percent, to 1,881.77. The energy and raw materials sector led the decline, as commodity prices tumbled.

Commodity-related companies in Hong Kong also came under fierce pressure as worries over sagging demand sent prices of metal and crude oil skidding overnight.

Glencore Plc - the Swiss mining-and-trading group - saw its share price slump to a five-year low in Hong Kong on Tuesday, down almost 30 percent to HK$8.6.

Petrochina Company Ltd slid 6.5 percent to HK$5.19, while Sinopec Corp dropped 7.25 percent to HK$4.48. Stocks in the energy and raw materials sector are expected to continue their downward trend in the near term, Pang said.

Fears over shrinking prices of commodities reflected broader weaknesses in global growth, he added.

The nosedive in Glencore share prices appeared to have a knock-on effect in Asia, said Bernard Aw, market strategist at IG Group.

There was an outsized selling in Japanese equities, where the benchmark Nikkei 225 plummeted below the key 17,000-point level to end 4.1-percent lower at 16,930.84 on Tuesday. The Shanghai Composite Index shed 2.02 percent to close at 3,038.14.

The Bloomberg Commodity Index slipped toward 16-year lows near 85. "It's, however, interesting to note that crude oil prices have remained quite resilient," said Aw. "This could be due to expectations of a further decline in US stockpiles."

celia@chinadailyhk.com

(HK Edition 09/30/2015 page9)