Hong Kong shares jumped on Friday to post a weekly gain of 4 percent, largely on short-covering ahead of Sunday's election in Greece, but activity remained light as Europe's deepening debt crisis kept investors on edge. The Hang Seng index and the China Enterprises index rose 2.3 percent and 2.4 percent on the day, respectively.
On the mainland, the Shanghai Composite rose 0.5 percent, while the large-cap focused CSI300 was up 0.3 percent. Turnover on the Hong Kong exchange recorded its worst week all year as uncertainty over the euro zone as well as worries about global economic growth, particularly in the US and China, kept investors from making any big bets.
At the same time, short-selling in Hong Kong as a percentage of daily turnover has stayed elevated, averaging about 10 percent for the week, according to data from the exchange.
"If anything most investors seem to be positioned for more downside next week. Activity has been really low and most of it was around putting some hedges in place," said a Hong Kong-based sales trader at a European bank.
The Greek election could set the country on a path out of the eurozone and increase the likelihood of financial contagion engulfing other weak economies in the bloc.
Central banks from major economies stand ready to take steps, including co-ordinated action, to stabilise markets as world economies prepare for a possible financial storm or public panic after the cliff-hanger vote.
After the closing bell, Hong Kong Exchanges & Clearing said it agreed to buy the London Metal Exchange as the world's most profitable exchange operator faces falling turnover in its main cash equities business as well as a slump in the market for initial public offerings.
While overall trading remained lacklustre in Hong Kong, European retailer Esprit Holdings bounced nearly 10 percent and was the most actively traded benchmark constituent for a third day.
CLSA upgraded Esprit to a "buy" but cut its target price by 26 percent after the company said on a conference call that its transformation plan remained on track.
Macau gaming stocks were on the back foot after reports that American asset manager Waddell & Reed had sold about $250 million of Sands China and Wynn Macau shares.
Sands shares dropped 2 percent making them the top losers on the Hong Kong benchmark. Wynn shares fell 5.7 percent.
On the mainland, Inner Mongolia Yili Industrial Group , one of China's top two milk producers, has recalled baby formula tainted with "unusual" levels of mercury, sending its shares down 10 percent.
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