HK stocks hit 3-month low, China ends down

SHANGHAI: Hong Kong shares dropped to a three-month low on Monday, led by banking stocks, as a government-orchestrated acquisition of Credit Suisse by UBS failed to ease market concerns of risk contagion.

China stocks also ended lower, erasing earlier gains, despite Beijing’s fresh monetary-easing measures to support economic growth.

Hong Kong’s benchmark Hang Seng Index slumped 2.7%, the lowest close since early December. The Hang Seng China Enterprises Index lost 2.2%.

China’s blue-chip CSI300 Index and the Shanghai Composite Index both lost about 0.5%.

Investors remained fearful about what could happen next after a week in which Credit Suisse - a systemically important lender in one of Europe’s financial capitals - was brought to its knees by the turmoil in the bond market resulting from the collapse of Silicon Valley Bank, sending Asian shares lower.

Over the weekend, UBS said it would buy Credit Suisse for 3 billion francs ($3.2 billion) and assume up to $5.4 billion in losses, a shotgun merger engineered by Swiss authorities that investors hope can head off an even bigger mess in global markets.

Hong Kong-listed banking stocks tumbled nevertheless on Monday, as the complete write-off of the troubled bank’s bond value soured sentiment.

HSBC’s Hong Kong listed shares slumped more than 6%, posting the biggest one-day percentage loss in nearly six months. Bank of East Asia shares dropped more than 4% to a 10-week low. Standard Chartered Plc tumbled more than 7%, the worst performance in a year.