China shares extended a winning streak on Wednesday, hitting a near three-month high as property stocks rose, which also helped Hong Kong markets reverse early losses and end higher for a second-straight day. Non-local residents of Shanghai qualify to buy second homes once they have held residence in the city for three years, the official Shanghai Securities News reported on Wednesday, citing the city's housing regulator.
This sparked chatter of "easing" in the embattled sector as markets shrugged off data showing China's manufacturing sector contracted for a fourth month in February as new export orders shrank. The Shanghai Composite Index finished up 0.9 percent at 2,403.6, its highest close since November 29 and above its 125-day moving average for the first time since last May. In a further bullish sign, A-share turnover surged to its highest since November 3.
The Shanghai property sub-index was a standout performer among sector gauges, rising 2.8 percent. Poly Real Estate rose 2.7 percent, while Shenzhen-listed China Vanke jumped 3.4 percent. Both closed at their highest since August 26. The China Enterprises Index of the top mainland shares in Hong Kong rose 1.2 percent. The broader Hang Seng Index finished up 0.3 percent at 21,549.3, staying well within its trading range in the last three sessions.
Gains in Hong Kong were limited by Li & Fung Ltd which fell 3.2 percent after Wal-Mart Stores Inc, one of its key supply chain clients, reported quarterly profit and sales that fell short of Wall Street expectations. "We will see trade remain in the current range in Hong Kong for a while longer after the recent rally," Wang Ao-chao, UOB Kay Hian's Shanghai-based head of research, told Reuters.
In Hong Kong, Agile Property jumped 7.2 percent as investors covered short positions. Short-selling averaged about 23 percent of Agile's total turnover on Monday and Tuesday.
In Hong Kong, the Hang Seng Index repeated its Tuesday trend by bouncing off the day's low to finish higher, although turnover stayed lacklustre as the benchmark faces stiff chart resistance.
The immediate target is 21,725.7, the top end of a gap that opened up between August 4 and 5 last year, which it briefly tested on Monday. Even if it scales above this level, it is faced with another gap between 22,041 and 21,725, the low of August 2 and the high of August 3, when the benchmark was on its way to a 20 percent loss in 2011. Li & Fung Ltd was a leading drag on the Hang Seng Index following customer Wal-Mart's underwhelming earnings.
Price cuts hurt Wal-Mart's fourth-quarter profit, reminding investors that steps the world's largest retailer is taking to bring back shoppers are coming at a cost to its profitability. Before Wednesday, Li & Fung was up more than 25 percent this year, largely on improving US data, after slumping more than 36 percent in 2011 and underperforming the 20 percent loss on the Hang Seng Index.