Shares in Hong Kong and China reversed earlier losses, led by banks and refiners, after Dubai said it had received $10 billion from fellow United Arab Emirates member Abu Dhabi, soothing investor worries about the economic outlook. The benchmark Hang Seng Index was up 0.84 percent or 183.64 points at 22,085.75, after falling as much as 1.6 percent in early trade.
Turnover rose to HK$70.01 billion ($9.03 billion), from Friday's HK$68.95 billion. The China Enterprises Index of top locally listed mainland Chinese stocks rose 0.63 percent to 13,049.34. Index heavyweight HSBC led gains, rising 1.44 percent to HK$91.45, while Standard Chartered gained 4.78 percent to HK$197.20.
Abu Dhabi bailed out neighbouring Dubai on Monday with $10 billion in surprise aid for debt-laden Dubai World, driving stock markets higher, but Dubai said creditors still needed to approve a standstill on outstanding debt. "The positive news about Dubai's debt restructuring helped to boost the market and trigger some short-covering," said Ben Kwong, chief operating officer at KGI Asia. "But overall, the consolidation mood is still there," he said. "I'm sceptical that this is a sustainable rebound." Investors were also concerned that funds were moving out of local equities on gains in the US dollar, analysts said.
"Since there are no fund flows entering the market, the overall situation is turning bearish," said Castor Pang, research director at Cinda International. "It's close to the end of the year and investors are trying to unload their risk, especially after they've earned huge profits in the year."
"They're still waiting for more cues that will help to improve overall market sentiment. Until then, fund flows will move out of the stock market into the currency market." China Mobile rose 1.42 percent to HK$71.35, shrugging off news from China on Friday that it would scrap local fees and some roaming fees for cellphone users for long-distance calls from January 1, as the nation moves towards more simplified billing systems.
Sinopec Corp jumped 7.3 percent to HK$6.91 after Bank of America-Merrill Lynch issued a bullish report on the company, saying the refiner's profits could rise until oil hits $130 per barrel. The Shanghai Composite Index ended up 1.71 percent or 55.585 points at 3,302.904, its highest close in a week, after slipping during the morning through its 30-day moving average at 3,234 points to a two-week intraday low.
But losing Shanghai A shares outnumbered gainers by 554 to 335, while turnover picked up to 139 billion yuan from Friday's 107 billion yuan. Sinopec jumped 8.39 percent to 13.70 yuan, while PetroChina, the most heavily weighted stock in the index, advanced 1.72 percent to 5.32 yuan.
The official Shanghai Securities News cited Sinopec's board secretary Huang Wensheng as saying that Sinopec was unlikely to buy overseas oil and gas assets from its parent this year because of the complexity of the process. "Investors took their cues from Sinopec," said Xu Yinhui, senior analyst at Guotai Junan Securities in Shanghai. "Although it said it was unlikely to acquire assets from its parent this year, that suggested it was likely to do so next year."
Analysts said institutions also appeared to be moving to bolster the share price of China Merchants Securities after it dropped below its IPO price at midday. Merchants Securities, which listed in Shanghai on November 17, ended 0.70 percent lower at 31.22 yuan, back above its IPO price of 31 yuan. Many major IPOs that have listed in Shanghai since the government lifted an unannounced ban on IPOs in June have seen a steady slide in their share prices. Several had reached hefty valuations when they surged during their market debuts.
Heavily weighted bank shares were also boosted by the Dubai news, with CITIC Bank racing up by its 10 percent daily limit to 8.18 yuan. The index faltered early in the session in large part due to concerns about rising share supplies, which were heightened after China's securities regulator said over the weekend that it would review an application by China First Heavy Industries for a Shanghai IPO aimed at raising 8.39 billion yuan.