* HSI -0.5 pct; HSCE -0.8 pct
* Financial shares sink, hit by global sell-off in banks
* Volume remains thin in holiday-shortened week
By Saikat Chatterjee
HONG KONG, Feb 12 (Reuters) - Hong Kong’s stocks fell for a second consecutive day on Friday, led by financials, as a global sell-off in bank shares gathered steam while concerns about the health of the global economy dragged shares in conglomerates and utilities lower.
The benchmark index was down 0.53 percent at 18,447.14 by the end of the morning session. The China-enterprises index was down 0.8 percent at 7,596.87.
In a holiday-shortened week, the city’s benchmark index is set to post its worst two-day performance in three weeks, losing 4.5 percent in value, as investors worried about the prospects of the Chinese economy.
Hong Kong’s financials sub-index, fell more than 1.5 percent on the day with shares in insurer AIA, Ping An and HSBC leading losers.
“We have been hit by a steady spate of bad news since the year began and I think the markets will remain in a state of flux in the near term until we see global bank shares stabilising,” said Francois Perrin, portfolio manager for East Capital Asia in Hong Kong.
Financial counters led the losses globally as disappointing earnings from Societe Generale extended the gloomy mood, even as some global central banks embarked on a policy of negative interest rates, adding a further headwind to lenders.
Volume remained thin with only HK$12.4 billion ($1.59 billion) worth of shares changing hands after local markets reopened on Thursday following the long Lunar New Year holiday. China’s markets remain closed and will reopen on Feb. 15.
Hong Kong’s assets have taken it on the chin in the opening weeks of the year due to increasing concerns about the economic slowdown in China. The city has strong economic ties to China but its stock markets are also a favorite playground for investors to execute their views on the Chinese economy.
With China’s markets closed for a week, investors are also expecting some catch-up to the recent global market sell-off.
“Where China fixes its currency next week will be key for Hong Kong’s markets in the short term, but we need to see this selling pressure on bank stocks reduce before a meaningful rebound,” said Sean Darby, chief global equity strategist at Jefferies Hong Kong.
Just before the start of China’s week-long new year break, official data showed a third monthly decline in the country’s massive foreign reserves in January as the central bank dumped dollars to defend the yuan and prevent an increase in capital outflows.
On a valuation basis, the benchmark Hong Kong index trades at a multiple of 8 times, its lowest since January 2009, while average valuations on MSCI’s Asia-ex Japan index remains around 12, broadly in line with historical averages.
Technical charts offered little hope, with the index trading below a key support level - the 38.2 percent Fibonacci retracement of the 2007 peak to 2009 trough - it broke through on Thursday.
Even though the stock market has lost 35 percent of its value since it peaked last April it is still up more than 70 percent from the 2008 crisis lows.
$1 = 7.7893 Hong Kong dollars Editing by Jacqueline Wong