Hong Kong shares ended their best quarter in 2-1/2 years with a whimper on Friday, as local property developers slumped after the arrest of the billionaire owners of Sun Hung Kai Properties for alleged corruption. The Hang Seng Index rose 11.5 percent this quarter, its best performance since July-September 2009 as investors piled up on beaten down stocks that took the brunt of a 20 percent slump in 2011.
---- Shanghai Composite Index rises
However, the benchmark shed 5.2 percent in March on escalating fears that slowing growth in China may hurt profitability of the mainland companies harder than expected. On Friday, the index closed 0.3 percent lower. Sun Hung Kai Properties (SHKP), Asia's largest property developer by market value, plunged 13.1 percent in almost 28 times its 30-day average volume, but finished off the day's lows, closing at its lowest since early January.
Hong Kong's Independent Commission Against Corruption (ICAC) arrested SHKP chairmen Raymond and Thomas Kwok in the biggest investigation since the agency was launched in 1974 to root out what was seen as widespread corruption in the government and police. Almost 100 million SHKP shares exchanged hands on Friday, the most since September 1998, when the physical real estate market in Hong Kong suffered a deep correction.
"Investors should think twice about bargain hunting in the stock or other Hong Kong developers, as we believe the dust will take longer to settle," Nicole Wong, CLSA's Hong Kong and China property analyst, said in a note to clients on Friday. SHKP's peers in the Hong Kong property sector were also not spared. Henderson Land lost 2.5 percent in almost six times its 30-day average volume, while Sino Land declined 3.6 percent in almost triple its 30-day average volume.
The Hang Seng Index's losses were limited on Friday by strength in two of the "Big Four" Chinese banks that reported favourable fourth quarter earnings late on Thursday. Their gains also helped the Shanghai Composite Index rise 0.5 percent on the day, ahead of a three-day tomb sweeping holiday in the mainland. Trading in Hong Kong will also be interrupted by holidays next Wednesday and Friday.