Hong Kong stocks fell for a third straight session on Monday, with China plays down 1.2 percent as worries persisted that mainland fund flows would stall, but Bank of East Asia (BEA) jumped in heavy volume in an arranged cross trade.
Brokers said BEA shares climbed on speculation that a bank was accumulating a stake in the Hong Kong-based lender. Mainland fixed-line operator China Telecom also leapt in heavy trade following encouraging comments by the country's Ministry of Information Industry about the prospects of a near-term industry restructuring.
Investors worried that inflows from the mainland would stall following reports that China had ordered Shenzhen banks to limit cash withdrawals to curb flows to the city's stock market. Earlier this month, Chinese Premier Wen Jiabao suggested a programme allowing mainland citizens to invest directly in Hong Kong stocks would see delays until further studies.
The benchmark Hang Seng Index tapped into positive territory before closing down 0.6 percent, or 154.26 points, at 27,460.17. For the year, the broad market is up 38 percent, but 16 percent off its peak. The China Enterprises index of H shares, or Hong Kong-listed shares in mainland companies, fell 202.56 points to 16,535.17.
Mainboard turnover was HK$104 billion (US $13.3 billion), the lowest level since September 14. "With the US and Japan on holiday later this week, it's a good week for Hong Kong to consolidate and build a base," said Andrew Sullivan, head of sales trading at Daiwa Securities.
Brokers expect the market to be locked in a range in light trade for the rest of the week. Bank of East Asia's shares were the day's most active, rising 4 percent to HK$49.25. Spanish savings bank Criteria Caixa and top mainland lender Industrial & Commercial Bank of China were two of the names floated as seeking to accumulate stakes in the Hong Kong-based lender.
Criteria said in September it had bought a 4 percent holding in BEA. Also, UK-based Standard Chartered edged up 0.8 percent to HK$275.2 after a Financial Times report said three mainland banks had approached Singapore state investment agency Temasek for its 17 percent stake in StanChart.
The country's top fixed-line operator China Telecom jumped 4.6 percent to HK$5.45, while its smaller rival China Netcom surged 5.5 percent to HK$21.15. China's Ministry of Information Industry said it would grant them licences for mobile telecom services "at an early date".
Hong Kong Exchanges and Clearing Ltd, which runs the city's bourse, slid 2.3 percent to HK$229.6 in heavy trade as investors worried turnover has peaked amid a slowing pace of mainland flows. Mainland heavyweights were also sold off on flow fears. Wireless operator China Mobile fell 1.1 percent to HK$131.80.
China Coal tumbled 6.8 percent to HK$20.60. Sinopec Corp's was off 2.3 percent at HK$10.42. China Life dropped 2 percent to HK$42.60. On a bright note, Alibaba.com climbed 4.4 percent to HK$32.35, tracking gains in tech shares in New York.