Hong Kong shares moved higher on Wednesday, boosted by gains in stocks that suffered the most in the previous session and driven by short-term investors, but strength among defensive counters and the lowest turnover in almost a month pointed to caution.
Losses in China Pacific Insurance (Group) Co Ltd - after its nine-month earnings report got a mixed reception - suggested investors could punish any unfavourable earnings ahead. "We don't expect earnings to boost stock prices given the changing macro environment, but if any company earnings slip below expectations, it could put some short-term pressure on its share price," said Alan Lam, Julius Baer's Greater China equity analyst.
Not surprisingly, the eurozone debt crisis and fears of a US recession have doomsayers pricing in another global financial meltdown. Part of that approach involves betting against China, which for most foreign investors is only possible in Hong Kong markets.
Last quarter, the Hang Seng Index lost more than 21 percent. From a trough on October 4, the index then bounced 16 percent over eight sessions largely on a short squeeze, a sign to how strongly investors had been betting against China.
On Wednesday, the Hang Seng Index closed up 1.3 percent at 18,309.2 points, finishing off its opening high at about 18,400, which is the bottom end of a gap that opened up Tuesday when the benchmark lost more than 4 percent - one of several levels of resistance seen on the charts.
Even if this gap, the top end of which is about 18,675, is breached, the high reached on Monday at 18,908 is seen as the next resistance level. Topping percentage gains among Hang Seng components on Wednesday was Hong Kong developer Henderson Land, which gained 4 percent after losing 4.3 percent on Tuesday.
The Shanghai Composite Index edged down 0.3 percent to end at 2,377.5 in thin A-share turnover, after see-sawing between positive and negative ground for much of the day. Sinohydro Group, which had built the Three Gorges Dam, plunged 7.8 percent and was the most actively trade stock in Shanghai after it had closed up 17 percent in its Tuesday debut.
China Pacific Insurance (Group) Co Ltd lost 3.7 percent in Shanghai and 4.4 percent in Hong Kong after reporting that earnings grew 35.7 percent year-on-year in the latest, and 43.1 percent for the nine months of 2011. The loss for its Hong Kong-listed shares almost halved the stock's rebound from the October 4 trough, while losses in Shanghai brought it near 28-month lows.