Hong Kong shares slumped in the worst one-day drop in fourteen months on Tuesday, as the euro zone debt crisis worsens and a Moody's report reignited fears over corporate governance in Chinese companies.
The Hang Seng Index finished down 3.06 percent at 21,663.16, while the China Enterprises Index dived 3.72 percent to 12,032.03 points.
The Shanghai Composite Index closed down 1.72 percent at 2,754.58, its biggest one-day drop in four months, breaking below its 250-day moving average for the first time in more than a week in increased turnover.
HIGHLIGHTS:
* Moody's warnings about accounting and governance risks at dozens of small Chinese companies sparked a selloff in their shares and bonds on Tuesday. Most of the companies on Moody's red flag list are non-state companies involved in the resources or property sectors.
Longfor Properties Co Ltd tumbled more than 10 percent in almost eight times its 30-day average volume, while West China Cement Ltd , which received 12 red flags from Moody's, finished down 14.1 percent, recovering from a more than 26 percent plunge earlier in the day.
* Turnover on the day exceeded HK$80 billion, 14 percent above the 20-day average. Volumes of less than half of the 45 constituent stocks on the Hang Seng Index exceeded their 30-day averages.
* Prada SpA slumped 7.1 percent, with Europe-related counters were pummeled as the sovereign debt situation in the region worsened. London-based analyst Seth Peterson at Berenberg Capital Markets issued a “sell” rating on the stock in a report published on Monday, saying its 66 percent premium to the luxury goods sector was unjustified by fundamentals. Earnings growth was likely to be slower in coming years than in the run-up to the IPO, said Peterson.
DAY AHEAD:
* China is scheduled to release a last batch of June economic data on Wednesday, including gross domestic product, foreign direct investment and industrial output figures. - Reuters