Hong Kong shares traded lower on Friday morning, on track to post their first weekly loss in four, with sluggish performance in property counters and other large caps suggesting weakness could spill over into next week. China shares were also ended lower at the midday trading break after a choppy morning session amid the release of official inflation data that showed price pressures remained a concern for policymakers.
Property prices' continued resilience despite efforts by authorities in China and Hong Kong may prompt further action to cool the market, including further restrictions on lending, which could weigh on developer shares. "Moody's negative comments on the Chinese property sector and HSBC raising the HIBOR-based mortgage rate for new customers may affect short-term market sentiment on Chinese and Hong Kong property stocks," said Alan Lam, greater China analyst at Julius Baer.
Moody's Investors Service on Thursday downgraded its outlook for China's property sector to negative from stable on concerns about deteriorating credit conditions for developers over the next 12 to 18 months. A sub-index of property stocks in Hong Kong fell 0.9 percent, underperforming the broader Hang Seng index's 0.4 percent decline. The Hang Seng index ended at 23,929.3 at midday, with investors locking in profits after a sharp rally from a low of 22,284.4, a gain of 7.4 percent, following the Japan quake.
Industry bellwether Sun Hung Kai Properties fell 1.4 percent while rival Cheung Kong Holdings fell 0.6 percent. HSBC, down 0.6 percent and the top drag on the benchmark index, raised mortgage rates for the second time in a month. China's main stock index was down 0.5 percent, reversing earlier gains after China posted key economic data that showed inflation pressure was still high.
The benchmark Shanghai Composite Index edged lower to 3,026.4 points, after a 0.3 percent fall on Thursday. It has fallen 0.1 percent so far this week. "The March CPI figure shows that inflation pressure will not taper off in the short term and we expect consumer inflation to remain at high levels in the second quarter," said Sun Miaoling, Economist at CICC in Beijing.
Steelmakers underperformed on concern about the sector's profitability after Angang Steel Co Ltd warned that its first-quarter profit would plunge by 93.8 percent. It lost 3.7 percent. Almost all 48 steel companies listed on the Shanghai and Shenzhen markets fell, with Chongqing Iron & Steel, dropping 3.7 percent and Baoshan Iron & Steel Co Ltd, China's biggest-listed steelmaker, falling 2.4 percent. Property counters in Shanghai and Shenzen were mixed with large developer China Vanke down 0.3 percent but investors picking up bargains among small and mid-cap counters.
"Yesterday, property shares were weighed down by Premier Wen's comment about cooling down real estate prices, but the sector itself still has potential to rise due to cheap share prices," said Cheng Yi, analyst at Xiangcai Securities in Shanghai. Yantai Yuancheng Enterprise Group and Si Chuan Jinyu Automobile City, the biggest gainers on the Shanghai and Shenzhen market, jumped their 10 percent daily limit.
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