China's blue-chip index falls on policy tightening, valuation worries; Hong Kong down

SHANGHAI: China's blue-chip index fell after hitting an all-time high on Thursday, the first trading session following a week-long Lunar New Year holiday, on worries over policy tightening and lofty valuations.

** The CSI300 index advanced as much as 2.1% to an all-time high of 5,930.9 points, before retreating 0.8% to 5,759.37 points at the end of the morning session, while the Shanghai Composite Index rose 0.4% to 3,669.42 points.

** The tech-heavy start-up board ChiNext fell 3.2% by midday.

** Among sectors, the CSI300 consumer staples index and the CSI300 healthcare index fell the most, dropping 3.9% and 4.0%, respectively.

** Analysts and traders said the market's focus is now on liquidity conditions, which could impact risk appetite.

** The PBOC injected another 20 billion yuan via reverse repos, while 280 billion yuan worth of a similar liquidity tool was set to expire on the same day.

** "The PBOC's net drain via the open market operations confirmed it wanted to maintain relatively tight and balanced liquidity conditions," said Yan Kaiwen, an analyst with China Fortune Securities.

** "The monetary tightening, if any, would definitely start from China, which is most capable of doing that as it leads in the global economic recovery," he added.

** Worries over valuations also contributed to the fall in high-flying sectors, including consumer, healthcare and new energy firms.

** "Institutional investors had already began to cut exposure, after stellar gains that had pushed valuations of some sectors to lofty levels," said Hu Yunlong, chief investment officer at Beijing Kaixing Asset Management Company.

** "For now investors tended to rebalance their allocations and shift towards sectors with low valuations, like banking and securities firms," Hu said.

** Bucking the broad weakness, the CSI300 financials index gained 1.8%, while the CSI300 energy index jumped 5.2% on oil price gains.

** The Hang Seng index dropped 1.2% to 30,723.83 points, while the Hong Kong China Enterprises Index lost 1.0% to 12,105.01.