Hong Kong shares rose on Wednesday as strength in insurer AIA and telecom stocks helped to offset weakness in oil producers, which fell as crude prices skidded on worries over weak global growth. Investors appeared less keen to chase last month's 7 percent rally with China's domestic stock markets shut through the week and as uncertainty around Spain requesting a bailout kept a lid on risk appetite.
The Hang Seng index had opened up 0.5 percent as trading resumed after a four-day holiday weekend, but pared early gains to end up 0.2 percent. The China Enterprises index of top locally listed mainland firms closed little changed. China's domestic markets will remain shut through the week. Dampening sentiment was China's official purchasing managers' index for the services sector, which fell to 53.7 in September from 56.3 in August, in the latest disappointing data pointing to a protracted slowdown on the mainland.
---- China markets shut all week for Mid-Autumn Festival
Easing oil prices weighed on top Chinese producers. Petrochina fell 1 percent while CNOOC was down 0.4 percent. The two were the top drags on the Hang Seng after HSBC Holdings, which eased 0.6 percent. Short-selling in the Hong Kong market remained high, accounting for 10.7 percent of the day's turnover. Short interest in Hong Kong generally averages about 8 percent.
Worries over the economy brought defensives such as telecoms and other stocks less sensitive to growth back in favour. China Mobile, which is expected to release third-quarter results later this month, was up 0.6 percent while smaller rival China Telecom rose 1.1 percent.
Aside from investors looking for relatively safer sectors, the launch of Apple's 's iPhone 5 is also likely to give the 4G businesses of Chinese telecom operators a boost and prove a catalyst for share prices, Haitong's Huang said. Hardware provider ZTE Corp rose 4.3 percent, bucking a sluggish start to the month for Chinese shares listed in Hong Kong. Insurer AIA Group Ltd closed up 2.3 percent, having hit its highest level since going public in October 2010 earlier in the day.
Jefferies analyst Baron Nie initiated coverage on the stock last Friday with a "buy" rating, expecting the company to report strong third-quarter operating figures next week. Nie prefers AIA to Chinese insurers and expects shares to rise a further 18 percent from current levels. AIA shares are up 20.6 percent this year compared to a 13 percent rise for the Hang Seng. Shares of Cathay Pacific were up 3 percent and the best performers on the Hang Seng after the International Air Transport Association (IATA) raised its forecasts for industry profits.

Copyright Reuters, 2012

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