Hong Kong stocks edged slightly lower on Tuesday as investors locked in gains ahead of some key earnings reports.
Traders said the market was pausing for breath after a recent advance but was poised to test 14,000 before the end of the week. The blue chip Hang Seng Index fell 0.12 percent, or 16.09 points to close at 13,815.44.
Volume was in line with recent averages, with HK $20.5 billion (US $2.6 billion) changing hands.
"There is underlying continued strength in the market. The general global picture is bullish on Hong Kong and we're seeing foreign money come through based on that," said Nitin Dialdas, a research analyst at Richmond Asset Management.
Dialdas said foreign funds were likely to continue flowing into the region due to a strong growth story in China and an expected flurry of Chinese IPOs.
Chinese companies are seen raising US $15 billion in Hong Kong and New York listings this year following hot on the heels of a slew of successful listings in 2003.
China-backed conglomerate CITIC-Pacific Ltd led gainers, rising 3.25 percent to HK $23.75.
Global retailer Esprit Holdings also put in a strong performance, rising 1.88 percent to HK $32.50. The casual wear firm has led market gainers in the past five days, rising 15.58 percent.
Smith Barney, the research arm of Citigroup, added to a growing list of banks who have upgraded the stock after the firm posted a better-than expected first half net profit last week.
With a strong footprint in Europe, Esprit is also one of the few Hong Kong companies whose profits are closely linked to the surging euro currency. China Telecom Corp led large cap losers.
Shares in China's dominant fixed-line carrier fell 4.03 percent to HK $2.97 on news that the company and its state-owned parent are talking with several investment banks about new fund raising, a source close to the firms said on Tuesday.
A report in the International Financing Review said China Telecom is talking with investment banks about a US $3 billion share placement.
China plays held steady on market talk that Beijing will allow social security funds to invest in stocks after tapping domestic stock and bond markets last year to help shore up the country's under-funded social security system.
A Hong Kong official visiting Beijing told reporters he believed Hong Kong was the priority market for China social security funds.
The H-share index of China registered companies listed in Hong Kong rose 0.21 percent, or 10.70 points to 5,097.39.
Oil and commodity stocks turned positive after a morning dip as investors again tacked on to bullish signs for global commodity prices.
Coal miner Yanzhou Coal was the top gainer rising 6.86 percent to HK $9.35. The stock has risen by more than 50 percent over the past three months.
Investors also looked ahead to corporate results due Wednesday from Asia-focused bank Standard Chartered Plc, mid-tier property firm Hang Lung Properties Ltd and PC maker Legend Group Ltd.
Shares in Hang Lung led blue chip losers, falling 2.50 percent to HK $11.70. Legend Group fell 1.33 percent to HK $3.70 and Standard Chartered fell 1.09 percent to HK $135.50.
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