Hong Kong stocks eased for a fourth consecutive day on Tuesday, tracking another weak day in Shanghai, despite a surge in Chinese Internet giant Tencent and bargain hunting in certain beaten down stocks. The Hang Seng Index eased 0.05 percent to 23,788.83, with most analysts expecting the index to trade within a narrow range ahead of the Lunar New Year holidays next week.
Chinese Internet firm Tencent Holdings and iron ore producer Citic Pacific were outperformers on the day rising 4.7 percent and about 4 percent, respectively, on healthy volumes. Resource and oil companies saw mild gains after their recent weakness but market players pointed to the continued weakness in mainland markets as one reason investors were cautious, putting a dent in an otherwise strong start to the year.
"The A-share market is very weak with China trying so hard to curb prices and that's keeping some buyers away," said Jackson Wong, a vice-president at Tanrich Securities in Hong Kong. China's largest Internet firm by market value Tencent Holdings rose 4.7 percent on reports that it plans to launch a 5 billion yuan ($760 million) fund to invest in online games, social games and mobile games.
The shares, upgraded to "buy" at Deutsche Bank on Monday, have gained 17.8 percent this year and have significantly outperformed the benchmark index each year since 2005 except the slight lag in 2010. Citic Pacific jumped about 4 percent on expectations that iron ore prices would continue to stay elevated. Julian Bu, an analyst with Macquarie Securities, raised his price target on the stock to HK$31, nearly 50 percent above current levels, citing the outlook for higher iron ore prices on the back of supply concerns.
Shanghai's key stock index fell 0.7 percent to its lowest level in nearly four months and is down 4.5 percent so far this year, as it continues to lag other North Asia markets which have outperformed the rest of the region. The tighter money market has made investors more nervous, said Chen Huiqin of Huatai Securities in Nanjing.
China's central bank is using reverse bond repurchase agreements and has halted bill sales in an attempt to ease an acute liquidity squeeze that has cut funds in the stock market. Resource shares broadly underperformed while financials were slightly higher although overall volume remained lacklustre, indicating investors were cautious about making big bets ahead of the week-long holiday.
Shares of Sinopec fell 1.5 percent and were the biggest drag on the benchmark followed by project construction firm China Gezhouba Group which dropped 6.6 percent. Gezhouba shares are up 8 percent so far this year.