Hong Kong shares fell on Tuesday, dragged lower by large-cap bank and materials shares as nervous investors awaited a bond auction which could see a further jump in Spain's borrowing costs, threatening a new crisis in the euro zone. The Hang Seng index fell 0.2 percent to 20,562.3 points, with the China Enterprises index of top locally listed mainland firms dropping 0.5 percent. On the mainland, the Shanghai Composite fell 0.9 percent, while the CSI300 index was off 1.3 percent.
Trading activity was sluggish with Hong Kong turnover falling to HK$46 billion, or 16 percent below an already depressed 20-day average, suggesting no rush for the exits but little buying interest either outside of news-driven stocks. "General caution means a lot of investors are just sitting on the sidelines," said a Hong Kong-based trader at an American brokerage. "But light volumes show no signs of panic, so it will be short-term trading with the chance of an equally swift rebound," said the trader.
Excluding three share placements on Monday, short-selling accounted for about 9.2 percent of total turnover, according to data from the exchange, which remains above average levels for Hong Kong and suggests a positive data surprise could prompt a bout of short-covering.
The Hang Seng could remain weak in the near term, though, as the next significant support on the charts, the 200-day moving average, is currently just below 20,000, is another 2 percent away. While banks were the biggest drags on the day as investors booked profits following recent gains, cement stocks also tumbled following poor week-on-week pricing data from China released on Monday.
China National Building Materials fell 5 percent and was the top loser on the China Enterprises index, followed by another cement manufacturer Anhui Conch which fell 3.9 percent. Aluminum Corp of China shares came under pressure after the Mongolian government said it has suspended exploration and mining licenses for SouthGobi Resources' Ovoot Tolgoi mine.