Hong Kong shares slipped from a 4-1/2-month high in light trade, while mainland Chinese markets sank to their lowest in almost two weeks, due to weakness in commodity sectors after steep overnight losses in the physical markets. Chinese automakers with joint ventures with their Japanese counterparts such as Nissan, Toyota and Honda, suffered from continuing anti-Japan strife in the mainland. Dongfeng Group slid 5.1 percent to its lowest in almost a year.
The CSI300 Index of the top Shanghai and Shenzhen listings declined 1 percent on Tuesday, while the Shanghai Composite Index lost 0.9 percent in the lowest volume this month. Both mainland indices closed at their lowest since September 6, the day that state-run media reported that Beijing approved a slew of infrastructure projects to boost growth. In the past two days, the two indices have given back more than 50 percent of their gains.
The China Enterprises Index of the top Chinese listings in Hong Kong shed 1 percent. The Hang Seng Index slipped 0.3 percent from Monday's highest close since May 4 to end at 20,601.9. But the Hang Seng benchmark failed for a second-straight session to close above chart resistance at 20,674.5, the lower end of a gap that opened up between May 4 and 7. Hong Kong turnover declined 19 percent from Monday.
"I think we held the gains from the rally of the last few days pretty well today, but there are definitely some questions whether hedge funds were unwinding their positions in oil this quickly after the QE3 announcement last week," said Edward Huang, equity strategist with Haitong International Securities. On Tuesday, shares of Chinese oil giant CNOOC Ltd slid 1.4 percent after crude prices tumbled more than $5 a barrel in a wave of late, high-volume selling late on Monday, leaving markets baffled.
CNOOC had hit its highest since May 4 on Monday, and surged almost 9 percent in the two days after the US Federal Reserve announced a third round of quantitative easing. Other commodities-related sectors were also significantly weaker. China Shenhua Energy Co Ltd, the mainland's biggest coal producer, fell 1.6 percent in Hong Kong and 1.9 percent in Shanghai.
Angang Steel slumped 6 percent in Hong Kong and 1.5 percent in Shenzhen. Aluminium Corporation of China (Chalco) lost 3.6 percent in Hong Kong and 3.3 percent in Shanghai. Having weakened sharply on Monday, the Chinese property sector reversed early Tuesday losses after official data for housing prices signalled a gentle recovery in the market.
Data showed home prices rose month-on-month in 35 of 70 major cities in August, down from 49 in July. Reuters calculations, based on data from the National Bureau of Statistics, showed prices increased 0.1 percent in August from July, but fell 1.4 percent in August from a year ago. Shanghai-listed Poly Real Estate gained 1.1 percent, recovering about one-third of Monday's losses after data suggesting lacklustre sales in the first two weeks of this month raised fears overall sales could underwhelm in the peak period in September and October. In Hong Kong, China Overseas Land & Investment rose 1.1 percent, while Evergrande firmed 0.9 percent.
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