Hong Kong shares retreated from near two-week highs on Thursday as lingering worries over China's policy tightening prompted investors to take profits from the market's recent rebound. Dealers said investors were reluctant to stake out new positions until they see how Shanghai stocks react to the central bank's latest move on Friday to clamp down on excessive lending.
Markets in China will reopen on Monday after being closed all this week for the Lunar New Year holidays. After Chinese markets closed on Friday, the People's Bank of China raised banks' reserve requirements for the second time in two months as it scrambles to absorb ample liquidity in the banking system and keep the economy from overheating.
Investors fear more moves by the PBOC after the holidays as it tries to stave off inflationary pressures and potentially destabilising asset bubbles. Though analysts doubt gradual policy tightening would derail China's robust economic growth, investors fear tougher measures will hurt profits for Chinese banks and property developers in particular.
The benchmark Hang Seng Index ended down 0.5 percent, or 111.86 points, at 20,422.15, after holding near two-week highs in morning trade. The China Enterprises Index of top locally listed mainland Chinese stocks fell 0.9 percent to 11,601.67. The Hang Seng has gained about 5 percent since February 8 but is still off nearly 7 percent so far this year as investors recoiled from riskier assets on worries about the strength of the global economic recovery, debt problems in Europe and the impact of China's policy tightening.
Highlighting investor caution, market turnover in Hong Kong fell to HK$34 billion ($4.38 billion) on Thursday, the lowest since the start of the year, from HK$39.12 billion in the previous session. Chinese lenders ICBC and Bank of China slipped 0.9 percent and 1.6 percent, respectively, while top Chinese property developer China Overseas Land lost 1.3 percent. "I don't think the reserve requirement ratio has been discounted in the market. When the Chinese market opens on Monday, reality will come back," said Peter Lai, a director at DBS Vickers, predicting a sharp sell-off in mainland banks and property stocks next week.
Shares in Sands China, the Macau unit of Las Vegas Sands Corp, tumbled 5.7 percent after its parent reported results on Wednesday that disappointed some investors who had been hoping for a better performance from its Macau operations. Rival casino operator Wynn Macau fell 3 percent, pressureed by the Sands China decline RUSAL, the world's largest aluminium firm, fell 6.7 percent in heavy trade, slumping to its lowest level since its listing in January.
Alfred Chan, chief dealer at Cheer Pearl Investments, said he believed a large player such as a hedge fund was selling the stock. "They've been waiting so long to unload it and there's been no turnaround in the business," he said. "Whoever's selling it is a big boy, there are no small investors involved in this stock." Metal stocks, which featured prominently among Wednesday's top-weighted gainers, fell as a stronger US dollar weighed on commodity prices, persuading investors to take profits on shares of resources firms.
Aluminium Corp of China (Chalco) fell 2.8 percent, while Zijin Mining lost 1.8 percent. However, shares in Lenovo Group, the world's No 4 PC brand, bucked the broader market weakness. Lenovo ended 2.7 percent higher after Standard Chartered said on Wednesday that the computer maker "may still deliver more upside on the back of strong volume growth in China and overseas markets.
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