Hong Kong shares finished their best quarter in more than 15 years with a whimper on Tuesday, as investors locked in some of the gains made during a stellar four-month rally that began in March. The index tacked on 35.4 percent in its biggest quarterly advance since the October-December period in 1993 when low interest rates in the US and China's economic awakening drove investors into Asia's high-growth "tiger" economies.
Chinese stocks snapped a four-day winning streak on Tuesday, as steel and auto shares fell, but they added a quarter to their value in the second quarter fuelled by signs of economic recovery and ample liquidity in the financial markets.
But the strong rebound in share valuations, which has outstripped the recovery in real economic activity, has made analysts cautious about the market's prospects in the second half. "Investors wouldn't dare be too optimistic about first-half earnings, while the pace of IPOs will also be in focus in the third quarter," said Western Securities analyst Cao Xuefeng.
Market watchers also expect new lending in China, which soared to 7 trillion yuan ($1.025 trillion) in the first half of the year and were a key driver of the stock market gains, to ease in the rest of the year. The benchmark Hang Seng Index finished down 0.81 percent at 18,378.73, but tacked on 1.1 percent in its fourth straight month of gains in June.
The 42-stock gauge rose 27.7 percent in the first half, buoyed by signs of a likely early recovery in the Chinese economy, and is valued at 16.5 times estimated earnings in 2009, compared with less than 10 times at the beginning of the year. The China Enterprises Index, which represents top locally listed mainland Chinese stocks, slipped 0.2 percent to 10,962.61.
Oil refiners outperformed after China increased gasoline and diesel prices for the third time since late March to their highest levels ever. PetroChina, the most heavily weighted stock on the Shanghai index, gained 0.3 percent to 14.48 yuan while its Hong Kong-listed shares dropped slightly in late-session profit-taking. Asia's top refiner Sinopec Corp advanced 0.7 percent to 10.66 yuan in Shanghai and 3.3 percent to HK$5.91 in Hong Kong.
The Shanghai Composite Index ended down 0.54 percent at 2,959.362 points, after an assault on the psychologically important 3,000-point level in the morning faltered at a fresh one-year intraday high of 2,997.272. Air China slipped 1.4 percent to 7.02 yuan, while SAIC Motor sank 4.11 percent to 14.95 yuan after China's unexpected fuel price increase.
Losing Shanghai A shares outnumbered gainers by 575 to 328, while turnover in Shanghai A shares rose to 143.2 billion yuan ($21.0 billion) from Monday's 136.5 billion yuan. Industrial and commercial Bank of China, the country's biggest lender, sagged 2.52 percent to 5.42 yuan.
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