(Corrects throughout to reflect HSI first dipped below 200-day MA on Friday, not Monday)
* HSI -2.1 pct, H-shares -2.3 pct, CSI300 -1 pct
* HSI breaks further below 200-day MA
* Outperformers lead losses as volumes spike
* China Coal Energy further roiled by profit warning
By Clement Tan
HONG KONG, Jan 27 Hong Kong shares slumped to their lowest in five months on Monday, tracking a broad selloff in Asia as emerging economies became a new worry on top of ones about liquidity and growth in China.
Mainland Chinese markets were also weaker, with growth-sensitive sectors among the leading drags at the start of a holiday-shortened week. Liquidity concerns could spike as cash demand rise ahead of the Lunar New Year, which starts Friday.
At midday, the CSI300 of the largest Shanghai and Shenzhen A-share listings was down 1 percent, while the Shanghai Composite Index shed 0.7 percent. Both were relatively more resilient compared to regional peers.
The Hang Seng Index sank 2.1 percent to 21,987.7 points, breaking further below its 200-day moving average, now at 22,494.7. It had closed below this level on Friday for the first time in five months.
The China Enterprises Index of the leading offshore Chinese listings in Hong Kong fell 2.3 percent.
Losses came in elevated volume, with Hong Kong markets among the worst performing in Asia. At 0440 GMT, the MSCI Asia ex-Japan was down 1.5 percent with the Indonesian benchmark sank 3 percent.
"This is probably just the start of a meaningful selldown, I wouldn't be in any hurry to hunt for bargains right now," said Hong Hao, chief strategist at Bank of Communications International. "I would be cautious over the next two to four weeks."
In an earlier note to clients, Hong said the 32 percent one-day surge in implied volatility last Friday suggests further losses are imminent. This was its biggest spike since April 15 and, according to Hong, only the eighth time it had topped 30 percent since 1993.
Signs are that retail investors are mainly responsible for the current selldown. But there is a risk of further weakness if institutional investors join the capital flight.
Profit-taking sapped sectors that had extended last year's outperformance into 2014, such as Macau casinos and Chinese technology and environmental plays. Melco Crown tumbled almost 7 percent, while Lenovo and Beijing Enterprise Water each shed more than 4 percent.
Growth-sensitive sectors were also hard hit in Hong Kong. China Shipping Development and Anhui Conch Cement each dropped about 5 percent. Footwear retailer Belle International was the biggest percentage loser among Hang Seng components, sinking 4.7 percent.
China Coal Energy dived 3.5 percent in Hong Kong to its lowest since July after the country's second-largest coal producer flagged a sharp decrease in its 2013 net profit due to sagging coal prices.
Trading in all eight shares debuting on the Shenzhen exchange was halted after they jumped and hit limits on first-day percentage moves. Another nine debuts are expected on Tuesday, including Shaanxi Coal Industry the largest A-share initial public offering since 2012.
Mainland China markets are shut for one week starting Friday, while Hong Kong will trade for half a day on Thursday and then shut Friday and Monday for the Lunar New Year.
CHINA CREDIT WORRIES
The Chinese financial sector was broadly weaker as concerns linger about a troubled Chinese wealth-management product marketed by the country's largest lender, Industrial and Commercial Bank of China (ICBC). There are some signs that ICBC may offer some help in bailing out investors.
Mainland news reports suggested that the Shaanxi government may intervene to prevent a default as it deems the Liansheng coal mine, the underlying assets for the trust products, as too big to fail.
ICBC sank 1.9 percent in Hong Kong and 0.9 percent in Shanghai. Ping An Insurance dived 3.7 percent in Hong Kong and 2.9 percent in Shanghai.
Although money rates have stablized following a net 375 billion yuan cash injection last week, the largest in nearly a year, the possibility of a wealth-product default has deepened concerns on tightening liquidity conditions in the mainland.
On Monday, the People's Bank of China-controlled Financial News reported that maintaining financial system stability is the central bank's "most urgent task".
"We would continue to avoid interest-rate sensitive sectors and sectors that leverage heavily on economic cycles, as the tides are turning," said BoComm's Hong. "Areas with excessive leverage will be the pressure point in a liquidity crisis." (Reporting by Clement Tan; Editing by Richard Borsuk)