Hong Kong shares wrapped up their worst week in more than a year with a 1.2 percent drop on Friday as investors braced for US jobs data that could lead to a tapering of the Federal Reserve's monetary stimulus. Mainland Chinese markets posted their first weekly loss in six as investors grappled with tight money supply before a three-day holiday next week and a slew of fresh economic data for May starting over the weekend.
The Hang Seng Index ended at 21,575.3 points, and chart support is next seen at its April low at about 21,423. The China Enterprises Index of the top Chinese listings in Hong Kong slid 1.7 percent. The CSI300 of the leading Shanghai and Shenzhen A-share listings sank 1.7 percent and the Shanghai Composite Index 1.4 percent with bourse volume some 16 percent below its average in the last 20 days.
On Friday, China's money rates skyrocketed from already-high levels the previous day, pushed up partly on rumours that a mid-sized bank had failed to repay an interbank loan. Dealers said that virtually the entire market was short of cash, with few or no banks willing to lend. On the week, the Hang Seng Index skidded 3.6 percent, its fourth consecutive weekly slide and the worst since May 2012. The H-share index dropped 3.9 percent. The CSI300 and Shanghai Composite dived 4.7 and 3.9 percent, respectively.
"It's getting quite frustrating," said Larry Jiang, chief strategist at Guotai Junan International Securities. "I don't think anybody is in too much of a hurry to do too much, and even then, it's quite difficult to look beyond the short term now." The cash squeeze in the mainland hurt most Chinese banking shares, particularly smaller ones. Bank of China fell 2 percent in Hong Kong and 0.7 percent in Shanghai. Industrial Bank slid 1.7 percent in Shanghai.
Mainland Chinese markets will be shut for the first three days next week for the Dragon Boat Festival holiday and resume trading on Thursday. Hong Kong will be closed on Wednesday. Data over the weekend will likely show growth in China investment and factory output probably remained listless in May on soft domestic demand, a Reuters poll showed. This would heightening risks that the Chinese economy may cool further in the second quarter.
China's new leaders will show greater tolerance for an economic slowdown than their predecessors did, and are likely to allow year-on-year quarterly growth to slip as low as 7 percent before launching fresh stimulus to lift activity, sources told Reuters. On Friday, Chinese insurer PICC Group tumbled 5.7 percent to HK$3.61. Exchange data showed a block of 106 million shares was sold at HK$3.45 apiece in an early trade, below its HK$3.48 initial public offering price last November. Friday's plunge was PICC's biggest since its December 10 trading debut, and came in volume that was more than 12 times its 30-day average.
PICC counted American International Group, China utility State Grid Corp, China's leading gold miner Zijin Mining Group and China Life Insurance among its cornerstone investors, who agreed to a lock-up period of typically six or 12 months, during which they could not sell their shares. Aluminium Corporation of China (Chalco) slipped 0.5 percent in Shanghai and ended flat in Hong Kong after saying it would sell some aluminium fabrication and alumina assets to its parent.