Hong Kong and Shanghai stocks tumbled on Thursday after figures showing strong economic growth and persistently high inflation fuelled expectations of further interest rate hikes this year Hong Kong's benchmark Hang Seng Index fell 1.70 percent, or 415.92 points, to 24,003.70 on turnover of HK$82.45 billion ($10.60 billion).
Beijing released figures Thursday showing the economy grew a quicker than expected 10.3 percent last year while inflation was 3.3 percent, higher than the government's target of three percent. Traders had welcomed the gross domestic product figures when they were leaked on Wednesday - sending markets higher - but the consumer price data raised the prospect of another round of policy tightening to cap prices.
"Investors will be looking to Beijing's monetary policy moves and US companies' earnings for direction in the next few weeks," said Jackson Wong, investment manager at Tanrich Securities. Shipping firm China Merchant Holdings was the biggest decliner, shedding 4.1 percent to HK$33.00. Financial firms were down across the board. Bank of China dropped 2.6 percent to HK$4.18 and insurer Ping An declined 2.5 percent to HK$81.20, while Bank of Communications fell 1.4 percent to HK$7.82. "China's economy defied expectations of a mild cooling to stage a re-acceleration in the fourth quarter.
The country's strong economic growth will give those in the government in favour of further monetary tightening greater reason to act," ratings agency Moody's said in a research note. China Unicom bucked the downtrend in Hong Kong, rising 1.0 percent to HK$12.06 after saying Wednesday it added 1.284 million new 3G subscribers in December, bringing the aggregate number to 14.06 million. Chinese shares slumped 2.92 percent.
The Shanghai Composite Index, which covers both A and B shares, was down 80.45 points at 2,677.65, its lowest since September 30, on turnover of 95.9 billion yuan ($14.8 billion). The key index has lost 4.6 percent since the beginning of the year due to the fears over a possible rate hike or increase in banks' reserve requirements.
"I think an interest rate hike after the Lunar New Year holiday in February is likely, as policymakers are still concerned about inflationary pressures and hot money inflows," Zhang Gang, an analyst at China Central Securities, told Dow Jones Newswires. Property developers fell because of concerns about further measures to curb high home prices. China Vanke, the country's largest property developer by market share, fell 4.7 percent to 8.14 yuan and Poly Real Estate Group declined 6.3 percent to 13.03 yuan. Coal miners fell on lingering concerns about price controls. Shanxi Xishan Coal and Electricity Power ended 5.5 percent lower at 25.10 yuan and China Shenhua Energy fell 3.9 percent to 23.15 yuan.