* HSI -2.4 pct, H-shares -3.2 pct, China still shut
* Hong Kong reopens after New Year holiday, China reopens on
* Anemic China, U.S. data aggravate jitters, deepen selloff
* Lenovo headed for biggest single-day loss since 2009
By Clement Tan
Feb 4 Hong Kong shares stumbled in their first
Year of the Horse trading on Tuesday, as the reopened market
caught up with plunges elsewhere and Chinese growth-sensitive
sectors led losses that made benchmark indexes reel.
Lenovo Group was a striking underperformer as Hong
Kong resumed trading after closing at midday Thursday for the
Lunar New Year holiday. The stock fell 14 percent, hit by a
series of broker downgrades on fears recent deals would dilute
earnings amid reports of another joint venture with Sony.
Mainland Chinese markets remained shut for the holiday and
will reopen on Friday.
At midday, the Hang Seng Index was down 2.4 percent
at 21,511.1 points, just above chart support seen at August lows
at about 21,465.7. The China Enterprises Index dived 3.2
percent to its lowest since August.
Losses tracked a rout on Wall Street after data showed new
U.S. manufacturing growth plunging by the most in 33 years,
adding to the gloom after China's official manufacturing
purchasing managers' index (PMI), released over the holiday, hit
a six-month low at 50.5 in January versus 51 in December.
Adding to jitters on slowing growth in the world's
second-largest economy, China's National Bureau of Statistics
said on Monday the official non-manufacturing Purchasing
Managers' Index (PMI) fell to a five-year low of 53.4 in January
from December's 54.6.
The Hang Seng benchmark has now slumped more than 10 percent
from Dec. 2 highs, while the H-share index is off nearly 18
percent. Both are now less than 10 percent above June 2013
"We are getting within 7 percent of last year's lows and at
that level, fundamentals would offer some support at six times
price-to-earnings," said Erwin Sanft, Standard Chartered's Hong
Kong-based China equity strategist. "It is not common to see a
market trading at 0.9 times book value for a prolonged period of
"Experienced emerging market investors would be looking at
this selldown with great interest, looking to pick up quality
names on the dip, but they are still in the minority for now,"
One such counter could be Lenovo Group, whose
shares plummeted 14.3 percent on Tuesday in heavy volumes,
headed for their biggest single-day loss since January 2009.
Among the brokerage downgrades were ones from UBS, Morgan
Stanley and Jefferies.
Lenovo's acquisition of Motorola Mobility for Google
Inc. "is a correct move, but will lead to multi-year
negative impact on earnings," Jefferies analysts said in a
report dated Feb. 3. They cut their target price for the stock
by more than 20 percent and downgrading it from "hold" to
Last week, Lenovo wrapped up two deals totalling $5.2
billion, including the $2.9 billion Motorola Mobility purchase,
a deal some in the market saw as too expensive.
On Saturday, Japanese broadcaster NHK reported that Lenovo
was in talks with Sony about a possible joint venture
to take over Sony's loss-making Vaio PC business outside of
Japan - a report Sony said was inaccurate.
Since hitting their highest close in almost 14 years last
Wednesday, Lenovo shares have plunged 21 percent, shaving some
HK$24.3 billion ($3.13 billion) off its market capitalization.
They are currently trading at 15 times forward 12-month
price-to-earnings, according to Thomson Reuters StarMine.
On Tuesday, Chinese financial counters were the leading
drags on benchmark indexes. Industrial and Commercial Bank of
China and China Construction Bank each slid
nearly 3 percent, while CPIC tumbled almost 6 percent.
In another indicator of the extent of Tuesday's selloff,
about four stocks declined for every counter that advanced.
Midday turnover was the most robust this year, with short
selling accounting for 11.4 percent. Short interest accounted
for 84 percent of turnover in the tracker fund.