HONG KONG, Aug 18 (Reuters) - Hong Kong’s key share index fell to its lowest level in six weeks on Tuesday, dragged down by a sharp plunge in China stocks on fears that Beijing will allow a deeper depreciation in the yuan.
The Hang Seng index ended down 1.4 percent at 23,474.97 points, its lowest close since December and its third consecutive losing session.
The China Enterprises Index lost 1.8 percent to 10,770.05 points, its lowest close since November 2014, when a blistering rally in Chinese shares took off.
Chinese stocks plunged on Tuesday as the yuan weakened against the dollar, reigniting fears that Beijing may be keen to see a bigger slide in the currency, despite assurances from the central bank last week that it sees no reason for further depreciation.
The central bank stunned markets last Tuesday by devaluing the currency by nearly 2 percent, and then struggled to stabilise it in the face of panic selling.
Concerns that companies may pull more money out of China as the economy slows and speculation that the government may begin to scale back its massive support for the country’s stock markets also prompted investors to book profits on share price gains seen in recent weeks, traders said.
“A continuous outflow of capital is also hammering sentiment,” said Ben Kwong, a director at KGI Asia.
The central bank made its biggest injection of funds into money markets in more than six months early on Tuesday, but short-term interbank interest rates still rose, adding to worries that liquidity was tightening as investors moved more capital out of the cooling economy.
The Hang Seng property subindex led the slide in the main index, falling 1.6 percent to its lowest close since March this year, despite data showing home prices in China rose for the third straight month in a rate bit of good news for the economy.
The finance sub-index fell 1.4 percent. (Reporting by Donny Kwok; Editing by Kim Coghill)