Hshares slump most in seven months amid Fed rate con­cern

China Daily (USA) - - BUSINESS - By BLOOMBERG

Main­land stocks in Hong Kong slumped the most in seven months, led by fi­nan­cial com­pa­nies, as ris­ing bets the Fed­eral Re­serve will raise bor­row­ing costs this year de­railed one of the world’s best ral­lies.

The Hang Seng China En­ter­prises In­dex tum­bled 4 per­cent at the close, its big­gest loss since Feb 11. The gauge rose 34 per­cent from a Fe­bru­ary low through Fri­day, send­ing a mo­men­tum in­di­ca­tor to the high­est level since April 2015. China Life In­sur­ance Co and China Con­struc­tion Bank Corp fell more than 5 per­cent.

The Shang­hai Com­pos­ite In­dex slid 1.9 per­cent at the close, near­ing the 3,000 level that has trig­gered State sup­port in the past.

Fed­eral Re­serve Bank of Bos­ton Pres­i­dent Eric Rosen­gren warned on Fri­day that wait­ing too long to raise in­ter­est rates could over­heat the US econ­omy, a day af­ter Euro­pean Cen­tral Bank Pres­i­dent Mario Draghi sur­prised mar­kets by play­ing down the prospect of fur­ther stim­u­lus.

Spec­u­la­tion that the Fed will move slowly in rais­ingUS bor­row­ing costs has helped rank Hong Kong eq­ui­ties among the world’s best per­form­ers this quar­ter as the city’s cur­rency is pegged to the dol­lar.

“In­vestors are wor­ried the US will hike rates,” said Daniel So, a strate­gist at CMB In­ter­na­tional Se­cu­ri­ties Ltd in Hong Kong. “In the past few months, Hong Kong has out­per­formed most mar­kets be­cause of spec­u­la­tion cen­tral banks will con­tinue to ease or low US rates will con­tinue, so it’s es­pe­cially sen­si­tive to rate hike con­cerns.”

The Hang Seng China En­ter­prises gauge fell to 9,654.08 points. A mea­sure of its 14-day rel­a­tive strength in­dex was at 77.2 on Fri­day, above the thresh­old of 70 that in­di­cates over­bought con­di­tions to some traders. The bench­mark Hang Seng In­dex tum­bled 3.4 per­cent from a one-year high, with a gauge of its ex­pected price swings surg­ing the most since Jan­uary.

Net buy­ing of Hong Kong eq­ui­ties through an ex­change link with Shang­hai reached the high­est since April 2015 on Fri­day amid a flood of main­land money flow­ing across the bor­der. Global in­vestors sold a net 2.2 bil­lion yuan ($329 mil­lion) of main­land stocks through the link on Mon­day, the most since Novem­ber.

The Shang­hai Com­pos­ite capped its big­gest drop in six weeks, with nearly 12 shares fall­ing on the gauge for each that rose. The bench­mark eq­uity in­dex went the past 19 ses­sions with­out a 1 per­cent clos­ing move in ei­ther di­rec­tion. The Shen­zhen Com­pos­ite In­dex re­treated 2.9 per­cent, while the ChiNext in­dex of small-com­pany shares lost 2.6 per­cent.

China Life, which jumped 13 per­cent last week, dropped 5.6 per­cent in Hong Kong to pace in­sur­ers lower, while China Con­struc­tion Bank slid 5.4 per­cent. Ten­cen­tHold­ings Ltd, the big­gest gainer on the Hang Seng In­dex over the past month, sank 3.2 per­cent. AAC Tech­nolo­gies Hold­ings Inc was the day’s big­gest de­cliner on the Hang Seng In­dex as it tum­bled 8.4 per­cent, par­ing its 2016 ad­vance to 57 per­cent.

In­sur­ers had ral­lied last week af­ter main­land reg­u­la­tors al­lowed them to in­vest in the city’s eq­ui­ties through an ex­change trad­ing link with Shang­hai. The com­pa­nies are al­lowed to in­vest up to 15 per­cent of their as­sets in over­seas mar­kets in­clud­ing Hong Kong, which they can cur­rently do through a dif­fer­ent pro­gram.

A mea­sure of Hong Kong devel­op­ers de­clined the most since Jan­uary as China Re­sources Land Ltd slumped 5.9 per­cent from a one-year high and Hang Lung Prop­er­ties Ltd traded with­out the rights to a div­i­dend.

the de­cline in the bench­mark Shang­hai Com­pos­ite In­dex on Mon­day

The seven-year-old in­vest­ment out­fit now plans to add to a port­fo­lio of al­most 300 star­tups that in­clude app storeWan­dou­jia andMeitu, a de­vel­oper of selfie apps that’s close to list­ing in­Hong Kong.

“The new dual-cur­rency funds will strengthen our in­vest­ment ca­pac­ity,” Lee said in a state­ment. “Si­no­va­tion Ven­tures has in­vest­ment teams both in China and in the US, that could grasp piv­otal in­vest­ment op­por­tu­ni­ties in the two coun­tries.”

Lee’s firm op­er­ates in a man­ner sim­i­lar to Y Com­bi­na­tor Inc, the US startup in­cu­ba­tor.

Chi­nese-based ven­ture cap­i­tal firms raised just $400 mil­lion in the sec­ond quar­ter, the low­est fig­ure in al­most three years, ac­cord­ing to Lon­don con­sul­tancy Pre­qin Ltd.

Mon­day.

XU CONGJUN / FOR CHINA DAILY

An in­vestor mon­i­tors stock price changes at a se­cu­ri­ties bro­ker­age in Nan­tong, Jiangsu province, on

Kai-Fu Lee, founder of Si­no­va­tion Ven­tures, for­merly known as In­no­va­tion Works

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