Hong Kong and China stocks retreated on Tuesday in light turnover as heightened political risks in the region and lower oil prices weighed. The strong run-ups in both markets in recent weeks, with the Hang Seng Index jumping more than 50 percent since early March and the Shanghai Composite Index rising by nearly a quarter in the same period, have made investors cautious about valuations, said analysts.
"Money is not flowing into the market as eagerly as it was two weeks ago and that is partly because neither Hong Kong nor China are inexpensive places to buy shares anymore," said Linus Yip, strategist with First Shanghai Securities. "The magnitude of the impending correction very much hinges on news from the US and China," he said.
Analysts also blamed this week's public holidays - Thursday in Hong Kong and Thursday and Friday in China - for the sluggish investor participation. Growing fears that North Korea may fire another short-range missile weighed on other equity markets including Japan and South Korea, and sent crude oil below $61 per barrel. Offshore oil specialist CNOOC fell 3.3 percent in Hong Kong after a strong run-up last week on oil's $5 per barrel advance.
Hong Kong-based property developers advanced to nine-month highs with the prevailing low-interest-rate environment seen driving up demand for real estate. In recent days, top brokers including Morgan Stanley, Bank of America-Merrill Lynch and J.P. Morgan have taken a favourable view of the sector, raising price forecasts amid expectations that demand will recover further in the second half of 2009.
Sino Land finished at a nine-month high, climbing 8.7 percent to HK$13.94, while property conglomerate New World Development added 5.2 percent. The benchmark Hang Seng Index closed down 130.26 points at 16,991.56 led by a 1.4 percent drop in HSBC Holdings. Turnover edged down to HK$56.3 billion ($7.2 billion) from Monday's HK$58.8 billion. The China Enterprises Index of top mainland companies dropped 1.2 percent to 9,684.07.
BYD Co jumped nearly 3.3 percent to finish at a record high closing level on Tuesday after German carmaker Volkswagen said it would explore options to partner with the Chinese car battery maker in the area of hybrid and electric vehicles. Coal and property shares weakened after the official China Securities Journal reported that China was studying proposals to enact a property tax and reform its resource tax, but Huatai Securities analyst Chen Huiqin said such measures may take a long time to implement.
Coal industry leader China Shenhua Energy sank 3.3 percent to 25.19 yuan in Shanghai, while dropping 1.6 percent in Hong Kong. Property sector leader China Vanke lost 3 percent to 9.66 yuan. The Shanghai Composite Index ended 0.8 percent lower at 2,588.575 points after moving in a narrow range. Losing Shanghai A shares outnumbered gainers by 461 to 430.
While, turnover in Shanghai A shares edged up to 117.8 billion yuan ($17.2 billion) from Monday's 112.3 billion yuan. Chen added that the sluggish turnover below 140 billion yuan indicated weak underlying sentiment. Analysts said last Friday's news of plans to resume initial public offerings as early as next month could still weigh on the market, although the reaction had been limited so far.
"Investors turned cautious ahead of the long weekend, but the index could find support at the 30-day moving average (now at 2,560 points)," said Zheshang Securities analyst Zhang Yanbing. But Zhang added that the index's uptrend appeared intact as the liquidity situation was stable. The official Shanghai Securities News on Tuesday said new loans extended by Chinese banks would likely remain stable in May at the April level and edge up in June.
Comments
Comments are closed.