Stocks weaken ahead of plenum

Hong Kong stocks tumbled 275 points to the lowest in two and a half months and the yuan fell as bearish signals are mounting ahead of a key policy meeting.

The yuan fell by 24 basis points to 7.2698 per US dollar yesterday despite the bond rate rise after the Chinese authorities used various means to tame a rally in the government bond market.

The Hang Seng Index fell 1.6 percent to 17,524 points as investors do not expect a quick boost for stocks from the Third Plenum, the July 15-18 meeting that will gather some 400 government bigwigs, military chiefs, provincial bosses and academics in Beijing to steer the country's political and economic course.

Shipping stocks fell, with China's state-owned Cosco Shipping (1919) down 8 percent. Gaming stocks also saw a sell-off, with Galaxy Entertainment (0027) losing 4.3 percent.

This came as China's central bank said it would start conducting temporary bond repurchase agreements or reverse repos to make open market operations more efficient and keep banking system liquidity ample.

Meanwhile, China's state-run media Financial News reported that this month is expected to see an 800 billion yuan (HK$860 billion) liquidity gap, which increases the possibility for the central bank to cut reserve ratio requirements in the third quarter, citing experts.

Separately, the Mandatory Provident Fund Schemes Authority said yesterday that equity funds, which accounted for 44 percent of the total net asset value of MPF funds, recorded an average net return of 6.2 percent as of June compared to 12 months ago.

Elsewhere, bitcoin slid as much as 5.2 percent at one time on concerns about possible sales of the token by creditors of the failed Mt. Gox exchange, which has begun returning a roughly US$8 billion (HK$62.4 billion) hoard of the asset.

Staff reporter and Bloomberg