Hong Kong stocks ended up 0.1 percent at a 6-1/2 year closing high on Monday as rebounding commodity prices spurred rises in resource stocks like PetroChina Co Ltd, but broad gains were capped as investors grew cautious as the market edged above 18,000.
The benchmark Hang Seng index rose 21.34 points to 18,010.20, the highest close since March 2000, marking its fifth straight session of gains after scaling six-year highs last week.
Turnover was HK$29.0 billion (US $3.7 billion) compared to HK$40.2 billion on Friday. "I think the market faces large selling pressure above 18,000," said Louie Shum, managing director at Sincere Securities, citing lingering uncertainties about the US economy and fourth-quarter earnings.
Also, the strong fund inflows to the region fuelling Hong Kong equities could just as easily flow out. "There's a lot of liquidity in Hong Kong to speculate on the China stocks, particularly the banking stocks, but the liquidity can leave quickly. A correction of several hundred to 1,000 points is easy," said Josehph Lau, director at Tai Fook Asset Management.
Citigroup said in a research note dated October 16 it remained bearish on Hong Kong stocks, noting that the market lacked broad-based strength, with nearly 75 percent of its 21 percent gains so far this year attributable to cellular carrier China Mobile and global lender HSBC Holdings Plc.
Higher oil and metal prices led mainland resource shares higher as oil producer PetroChina Co Ltd, the day's second-most active stock, jumped 1.8 percent to HK$8.52 after saying on Monday it had pumped 5.8 percent more oil and gas, sold at higher prices, in the first nine months of 2006.
Sinopec Corp, Asia's top refiner, edged up 1 percent to HK$4.98. Lehman Brothers said in a research report it was lifting Sinopec's target share price to HK$5.80 from HK$5.20 and the company's 2006 earnings forecast by 20 percent on improving earnings at Sinopec's refining units.
China Shenhua Energy Co Ltd, the country's top coal producer, shot up 2.3 percent to HK$13.36 after reporting on Friday its third-quarter output rose 22 percent, exceeding expectations. Mainland banking stocks fell on profit-taking after rallying last week ahead of the US $19 billion initial public offering by Industrial & Commercial Bank of China, which has attracted orders in excess of US $150 billion from global institutional investors. China Construction Bank shed 0.8 percent to HK$3.64 and China Merchants Bank fell 1.2 percent to HK$11.66.
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