Hong Kong stocks ended little changed on Wednesday as bargain hunting offset worries over the spread of bird flu to neighbouring Guangdong province and weak quarterly results from US tech giant Cisco Systems.
"We're at a point where we are just happy to sit. Sellers are starting to be exhausted, but buyers are waiting for direction," said Nitin Dialdas, research analyst at Richmond Asset Management.
The blue chip Hang Seng Index slipped a modest 0.03 percent, or 3.28 points, to close at 13,086.73.
Volume was thinner with HK$15.7 billion (US$2.0 billion) changing hands compared to recent averages of HK$22.45 billion.
Shares in China registered companies listed in Hong Kong, known as H-shares, fell 102.70 points, or 2.20 percent to 4,559.61 as a rally in commodity stocks ran out of steam.
Recently-listed China Life Insurance Co Ltd also helped tilt stocks lower after several large investment houses, including Citigroup and Lehman Brothers, initiated coverage of the stock with "sell" ratings.
They cited the sharp run-up for the stock since its listing in December. China Life was also knocked by speculation that regulators may look into the locally-listed units of China Life and banking group ICBC (Asia) after reports of massive accounting irregularities in the books of their mainland parents.
Traders said the reports on China Life may help ground frenzied speculation over China IPO's and re-focus the market on fundamentals ahead of the results season.
"It's needed to prick the air out a market that has been quite frenzied. People need to get back to reality," Dialdas said.
Meanwhile, bird flu fears were played down by traders.
"The media has exaggerated the bird flu. I personally don't think this will affect us too much," said Peter Lai, director at OCBC Securities.
China confirmed on Tuesday that an outbreak of bird flu among poultry in the southern province of Guangdong was the deadly H5N1 strain, and said it suspected outbreaks in two other provinces.
Hong Kong has not reported any cases to date but many people fear the virus will spread to the territory from China despite a ban on chicken imports from the mainland. Bargain hunters picked up large cap stocks.
Hang Seng heavyweight HSBC Holdings gained 0.42 percent to HK$120.
Hong Kong's largest property firm Sun Hung Kai Properties rose 1.69 percent to HK$75.25 on signs of a robust recovery in the city's property market.
The firm's shares have risen over 15 percent so far this year, outstripping a 4.2 percent rise in the Hang Seng Index.
Blue chip clothing retailer Esprit Holdings gained 2.21 percent to HK$25.40.
Shares in Hong Kong public transport company MTR Corp jumped 2.07 percent to HK$12.30 after a media report said the Hong Kong government would give the go-ahead for a long-awaited merger between it and the territory's other government-controlled railway, KCRC.
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