Hong Kong shares edged lower on Monday, as local developers tumbled on fears that new measures to cool soaring property prices will sap demand, but broader losses were limited by earnings-driven strength in Chinese banks. The Hang Seng Index ended down 0.2 percent at 21,511.1 points, the lowest close since October 17. The China Enterprises Index of the top Chinese listings in Hong Kong outperformed, rose 0.9 percent.
On the mainland, the CSI300 Index of the top Shanghai and Shenzhen listings slipped 0.5 percent, while the Shanghai Composite Index was down 0.4 percent. Both indices closed at their lowest since late September. Shanghai volume was the lowest in about one week. Hong Kong turnover sank to the lowest in almost two weeks, with the Hong Kong property and Chinese banking sectors seeing the bulk of the day's trading.
"There's some rotation from Hong Kong developers into the Chinese banking sector today after CCB and AgBank posted pretty good results over the weekend," said Jackson Wong, Tanrich Securities' vice-president for equity sales. Late on Friday, the Hong Kong government imposed a 15 percent tax on foreign and corporate real estate buyers and stiffened the resale stamp duty fees in the hope of calming the city's property prices, which have surpassed historical highs hit in 1997.
"I think many were quite surprised by the severity of the 15 percent special duty, so they took profits on the sector, which has done very well this year so far," Wong added. Shares of New World Development, which before Monday were up more than 100 percent in 2012, tumbled 6.4 percent to their lowest close since September 28. Monday's fall was the stock's biggest daily loss in almost seven months.
Both Henderson Land and Sino Land also slumped 6.4 percent. Sun Hung Kai Properties lost 5.1 percent and Cheung Kong Holdings shed 4.7 percent. In a report on Monday, Citi analysts said any dip in the sector represented "an enhanced buying opportunity", believing that stabilising home prices will remove policy risks and asset bubble concerns.
In Hong Kong, China Construction Bank (CCB) rose 1.2 percent and Agricultural Bank of China (AgBank) jumped 3.1 percent after posting positive third-quarter corporate earnings over the weekend. Analysts had expected the profitability of banks to be hit by two central bank interest rate cuts since June. But the earnings had been supported by China's landmark decision to let lenders set their own loan rates.
Still, CCB's 12 percent rise in third-quarter net profit growth lagged AgBank's 16 percent gain and Bank of China's (BOC) 17 percent increase. BOC rose 1 percent in Hong Kong on Monday, while Industrial and Commercial Bank of China (ICBC), which on Tuesday will be the last "Big Four" Chinese bank to post third-quarter earnings, inched up 0.6 percent.
China Petroleum and Chemical Corp (Sinopec) climbed 2.9 percent in Hong Kong and 1.1 percent in Shanghai after posting a smaller-than-expected drop in third-quarter earnings over the weekend. A positive China October purchasing managers' index (PMI) reading, expected on Wednesday, could further suggest a stabilising of the Chinese economy and buoy interest in growth-sensitive sectors, particularly those with encouraging third-quarter earnings.
Data over the weekend showed China's industrial profits rose 7.8 percent in September from a year earlier to 464.3 billion yuan ($74 billion), the National Bureau of Statistics said on Saturday, compared with a 6.2 percent drop in August.
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