Hong Kong stocks ended flat on Tuesday as strength in financial shares was offset by a slump in oil giants PetroChina and Sinopec Corp. Shares of the oil companies had surged in the previous session on speculation they would merge, but PetroChina slumped 5.5 percent while Sinopec tumbled 4.9 percent after the two dismissed such speculation.
PetroChina shares were also hit by a sharper-than-expected 82 percent fall in first-quarter profit, while investors in Sinopec were disheartened by news that a top executive of its state-owned parent China Sinopec Group is under investigation for alleged corruption. The Hang Sang Index ended flat at 28,442.75, while the China Enterprises Index lost 0.2 percent, to 14,714.79 points.
After a surge early this month that was triggered by Beijing's move to let mainland mutual funds buy Hong Kong shares through a key cross-border investment scheme, the Hong Kong market has entered a period of consolidation on signs on waning investor interest. Helen Zhu, head of China Equities at asset manager BlackRock said that valuations of some Hong Kong-listed shares now look "excessive" compared with their regional and global peers. "We prefer to be more selective and focus on those where we think valuations are still attractive," she wrote in a note on Tuesday.
However in the long term, China will further loosen capital controls, giving Hong Kong and mainland investors easier access to each other's markets, and this "could mean markets such as Hong Kong could see a larger influx of funds." Among the most actively traded stocks on Hong Kong's main board were Ping Shan Tea, down 6.5 percent to HK$0.09. China Culture Group, up 34.8 percent to HK$0.19 and Nan Hai Corp, down 7.0 percent to HK$0.12.
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