Hong Kong stocks retreated from a two-week closing high to fall 0.63 percent on Wednesday, weighed down by HSBC after the US government decided to sell its stake in Citigroup. The benchmark Hang Seng Index closed 135.44 points lower at 21,239.35, snapping a three-session gaining streak.
Hong Kong stocks, which rose by more than 50 percent in 2009, have slipped almost 3 percent in a dismal first-quarter performance, and is the sixth-worst performing stock index globally among 30 tracked by Thomson Reuters. "We may see the Chinese central bank raise rates in May or June to curb inflation," said Patrick Yiu, a director at CASH Asset Management. "If investors are able to price that in right now and accept that, then this market is still worth buying into."
The four Greater China stock indexes of Shanghai, Shenzhen, Taipei and Hong Kong take up four of the six places at the bottom of the charts, largely on fears that a hasty exit by the Chinese government on its stimulus programme could hit confidence. Turnover rose to HK$67.1 billion to a 3-1/2-week high, beating Tuesday's HK$62.86 billion.
HSBC was the biggest drag on the big board, falling 1.19 percent and contributing for 37 points on the index's overall loss and more than double that of runner-up Esprit. The US Treasury pledged to sell its 7.7 billion Citigroup shares this year, a step that further reduces the government's influence on the banking giant.
Mainland banks helped with upward momentum, with Bank of Communications (BoCom) closing up more than 4 percent to a four-month high after reporting fourth-quarter net profit that exceeded market expectations. Rivals ICBC also rose, climbing 0.68 percent, while Bank of China advanced 0.5 percent.
China's key stock index closed down 0.62 percent on Wednesday, halting a three-day winning streak as investors sold small-cap companies such as Fangda Steel, which dropped on concerns over fund-raising plans. The Shanghai Composite Index ended the day down at 3,109.105 points, holding just above key resistance at the 125-day moving average, now at 3,101, that was breached during a rally on Monday.
Despite this week's pick-up, the index lost 5.1 percent in the first quarter, only its second quarterly loss since 2008 and making it one of Asia's worst-performing markets as a clampdown on bank credit tightened liquidity available to buy stocks.
"With tightening liquidity still a factor in the market it is likely that investors will stick to trading small-cap companies in the coming weeks," said Zheng Weigang, analyst at Shanghai Securities. Analysts expect share prices to recover later in the year, however, as upbeat corporate earnings prospects bolster sentiment.
Fangda Steel was the day's biggest loser, down 6.72 percent at 10.69 yuan after it announced plans to make a private share placement. Chongqing Water was the day's second-biggest loser, falling 6.26 percent to 11.53 yuan, relinquishing some of its massive 70 percent gain when it debuted on the Shanghai stock exchange on Monday.
Citic Securities rose 0.53 percent to 28.42 yuan after it posted its best quarterly profit in two years and said it would consider raising funds to expand operations and cope with market volatility. Wen Lijun, analyst at Nanjing Securities said the market would continue to trade lower but within a narrow range, as investors were concerned over macroeconomic policy decisions.
"The market is watching for any signs to indicate a change of position on yuan appreciation," she said. China displayed new divisions on Tuesday over a rise in the yuan after two new advisers to the central bank called for the yuan to resume its gradual appreciation.
Electricity generator GD Power was the day's most actively traded stock, up 6.85 percent at 8.27 yuan after it announced a more generous-than-expected share bonus. The CSI300 Index, which will serve as the basis for China's first planned stock index futures to be launched on April 16, fell 0.63 percent, in line with the broader market.
Shanghai A-share turnover slipped to 122 billion yuan ($17.9 billion) from 125 billion yuan on Tuesday. Falling Shanghai stocks outnumbered gainers by 528 to 363. China also started allowing margin trading and short selling of stocks in a pilot programme on Wednesday, proceeding with long-planned innovations that are expected to improve market efficiency.
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