Hong Kong shares tumble

Hong Kong stocks failed to sustain mild opening gains for a second session on Tuesday as property developers and local banks dipped while defensives such as telecoms outperformed. The benchmark Hang Seng fell 0.3 percent to 23,484.3, with losses limited by a 0.9 percent rise for index heavyweight HSBC, which hit a 52-week high.
Some market players said talk that inflation in China could rise to as much as 6 percent by March was fuelling concern over tightening, weakening investor conviction and capping trading volume. "Inflation and monetary tightening worries in Asian emerging markets have led to capital outflows," said Alan Lam, Greater China analyst at Julius Baer in Hong Kong. "This trend may continue in the foreseeable future." Since late last year, investors have steadily moved funds away from markets facing high price rise pressures to those where inflation is less of an issue, in particular developed markets.
However, a trader at a large US investment bank in Hong Kong said a possible pull-back for the S&P 500, which rose to a 2-1/2 year peak on Monday even as volume fell, was a risk for Asian markets in the near term. A pick-up in merger activity drove the S&P 500 past the 1,313 mark and further into levels that prevailed before the financial crisis.
In Hong Kong, heavyweight HSBC Holdings Plc rose 0.9 percent, lending some support to the broader market, after overnight gains for its American Depository Receipts. HSBC is up more than 11 percent this year compared with a 1.8 percent rise for the benchmark. However, the gains were not enough to offset weakness in local property developers, which fell as the authorities were reported to be stepping up efforts to cool property prices.
Financial Secretary John Tsang would announce a plan to make more residential land available in the coming fiscal year when he delivers his budget speech on February 23, local newspaper Ming Pao reported, citing sources. Li Ka-shing-controlled Cheung Kong fell 3.1 percent, while rival Sun Hung Kai Properties shed 2.2 percent.
Also weaker was Tencent Holdings Ltd, which topped the worst performers list on the day by slipping 4.6 percent. Tencent, the dominant online gaming company in China, said last Friday that it had acquired a majority stake in Riot Games. Macquarie Securities analyst Jiong Shao in Hong Kong, who has a HK$125 price target on the stock, about 36 percent below the current level, said in a note that the investment pointed to Tencent searching for a new growth driver.
Bucking the weaker trend were shares of China Unicom, which rose 4.7 percent, the top performers on the Hang Seng, on healthy volume after brokerage Credit Suisse raised its price target on the stock. Credit Suisse, which said its latest survey of smartphone users in China suggested China Unicom continues to gain market share, raised its price target on the stock to HK$14.3, which implies a further 8 percent gain from current levels.