Hong Kong stocks rose nearly a third of a percent on Monday after a Wall Street rally, but nagging political uncertainties and interest rate expectations limited gains. "It seems like investors are still very cautious," said Herbert Lau, research director at Celestial Asia Securities. The benchmark Hang Seng index ended up 0.3 percent, or 41.17 points at 13,771.95. Turnover was below recent averages with HK$16.8 billion (US$2.15) worth of shares changing hands.
Gains in exporters such as sneaker maker Yue Yuen Industrial helped to boost the market, but a dip in ports-to-telecom conglomerate Hutchison Whampoa Ltd helped to limit upside.
Traders said the lack of an announcement over widespread expectations that the city's unpopular leader Tung Chee-hwa has resigned are weighing on the market.
"The general mood is waiting for news. Everything is up in the air," said Alfred Chan, chief dealer at Cheer Pearl Investments.
Some investors said Hong Kong shares were also suffering with funds seeking out cheaper valuations in other North Asian markets after strong gains in the past year.
"If you compare Hong Kong with Korea or Taiwan, they were out of fashion since 2003. The correction you're seeing is part of this asset allocation, but I don't see anything fundamentally wrong with the economy or stocks," said Flavia Cheong, fund manager at Aberdeen Asset Management.
Korean shares have surged 12.5 and percent since the start of the year while Hong Kong blue chips have fallen more than 3 percent.
Expectations that Hong Kong banks will hike rates soon are also further pressuring fund outflows, according to traders.
Hong Kong rates often move in tandem with the US since the city's currency is pegged to the US dollar. But Hong Kong banks have lagged in the latest interest rate cycle due to a surge of funds into the territory speculating on a revaluation of China's yuan currency. Those expectations are now waning, with Beijing signalling a major revaluation is unlikely to be announced in the short term.
The world's largest athletic shoemaker Yue Yuen Industrial Holdings led blue chips gainers, surging 4.13 pct to HK$22.70 thanks to a strong sales outlook and general investor enthusiasm for manufacturing and retail-related counters.
China oil plays also continued to glisten with world oil prices hovering near US$54 a barrel. China's largest oil producer Petrochina Corp rose 1.59 percent to HK$4.80.
But shares in ports-to-telecom conglomerate Hutchison Whampoa Ltd fell 2.19 percent to HK$67 on worries the shares may be overpriced.
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