HONG KONG: Mainland Chinese shares sank to their lowest in two weeks on Thursday, setting Hong Kong markets back, after data showed the rate of the slowdown in China's manufacturing activity was stabilising, lowering hopes for any imminent policy easing.
The HSBC Flash China manufacturing purchasing managers' index ticked up to 47.8 from a nine-month low of 47.6 in August, but there was little cause for premature cheer as a sub-index covering output fell to 47.0 its lowest since November.
Still it was enough to douse hopes that Beijing would follow the Bank of Japan, the European Central Bank and the US Federal Reserve in easing monetary policy in the near term.
"Data would probably need to be much worse than this for Beijing to cut interest rates or reserve requirements for banks with the 18th National Party Congress round the corner," said Alan Lam, Julius Baer's Greater China equity analyst.
The People's Bank of China utilised the 28-day reverse repo on Thursday only for the third time to inject $25.4 billion into onshore money markets, in a further sign that the central bank is holding off cutting banks' reserve requirements.
The CSI300 Index of the top Shanghai and Shenzhen listings went into the midday lunch break down 1.3 percent, while the Shanghai Composite Index shed 1.1 percent.
Both indices have now shed more than 4 percent from respective Sept. 10 highs, reversing gains from a stimulus-led rally after Chinese media reported a raft of infrastructure project approvals on Sept. 6 and 7.
The two indices have retreated to levels unseen since Sept. 6.
The Hang Seng Index and the China Enterprises Index of the top Chinese listings in Hong Kong each shed 0.5 percent. But the Hang Seng Index held above 20,674.5, the lower end of a gap that opened up between May 4 and 7.
Hong Kong turnover at midday was at its lowest in two weeks.
Chinese energy majors were major drags on indices in both Hong Kong and onshore Chinese markets. China Shenhua Energy Co Ltd , the mainland's largest coal producer, lost 2.3 percent in Hong Kong and 2.1 percent in Shanghai.
CNOOC Ltd, whose upstream business makes its share price more sensitive to oil prices, slumped 2.7 percent to its lowest this week.
Oil prices slumped on Wednesday as Saudi efforts to tame prices and a massive rise in US crude inventories after Hurricane Isaac fuelled a third day of heavy fund liquidation, one of the biggest sell-offs in more than a year.
Airliners conversely rose on lower fuel prices. Cathay Pacific gained 0.9 percent, while Air China rose 0.4 percent in Shanghai and 2.3 percent in Hong Kong.
The weak A-share market hit Chinese brokerages and insurance companies, seen as proxies for onshore Chinese markets because of their large investment and involvement. New China Insurance plunged 7.6 percent in Shanghai.
Haitong Securities shed 1.7 percent in Shanghai and 0.2 percent in Hong Kong. Citic Securities lost 1.2 percent in Shanghai and 1.3 percent in Hong Kong.
China Unicom, the second-largest mobile operator in the mainland, slumped 4 percent after the company posted underwhelming new August subscriber numbers.
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