Hong Kong stocks rose to their highest level in nearly three weeks on Thursday before running out of steam to close barely changed as investors booked profits on recent gains. The benchmark Hang Seng index reached a high of 13,750.48 a level last seen on January 7 before easing back to close up 0.04 percent, or 5.23 points, at 13,628.91. Turnover grew slightly to HK$18 billion ($2.3 billion) from HK$17.3 billion on Wednesday.
Over the last three sessions, the Hang Seng index has gained 1.8 percent, rebounding from a 2-1/2 month low of 13,320.53 plumbed on Monday.
Technical resistance at around 13,700 and increased volatility associated with the expiration of January Hang Seng index futures on Friday have made the going tough, traders said.
"The trading was a little bit more choppy in the afternoon, especially when the Hang Seng index reached 13,700," said Louis Wong, research director at Phillip Securities.
Still, analysts said confidence was slowly returning to the market as worries about capital flight and higher interest rates eased and with Wall Street starting to look better following its recent selloff.
"At this stage, I think the Hang Seng index will hover around 13,700 and I suggest if there is still some correction, this would be a good time to buy the dips," said Lianas Yip, strategist at First Shanghai Securities.
But investors are likely to be cautious in the lead-up to next week's US Federal Reserve policy meeting and Group of Seven meeting, where the Chinese yuan will be a hot topic of discussion.
"With the upcoming G7 meeting, speculation is rising that there will be pressure on the Chinese government to let the renminbi appreciate," Phillip Securities' Wong added.
Investors are also unlikely to take big positions before the Chinese New Year holidays starting on February 9, when most of Asia will be shut. Among the losers, global fashion retailer Esprit Holdings Ltd lost 2.14 percent to HK$45.70, oil and gas producer CNOOC Ltd.
Shed 0.61 percent to HK$4.075 while property firm Sun Hung Kai Properties Ltd edged 0.35 percent lower to HK$72 after climbing 1.05 percent in the previous session.
China plays fared better with renewed speculation of a renminbi revaluation spurring stocks like China Oilfield Services Ltd and toll road operator Jiangsu Express Co Ltd.
"The China stocks look undervalued if the renminbi is going to appreciate," said Herbert Lau, research director at Celestial Asia Securities.
China Oilfield put on 3.37 percent to HK$2.30, while Jiangsu Express added 3.03 percent to HK$3.40.
Gold miner Zijin Mining Group climbed 3.82 percent to HK$3.40 as gold bullion rose on festive demand and some Japanese buying.
Overall, the index for Chinese enterprise stocks better known as H-shares, added 0.28 percent to 4,692.82.