HONG KONG/SHANGHAI: Hong Kong shares eked out gains on Friday but posted their worst weekly decline in nine months as investors took profits in Greater China markets that have outperformed the region so far this year.
The benchmark Hang Seng Index closed up 0.5 percent on the day but lost 4.5 percent on the week.
The index closed at 22,829 points, slipping below a trendline support, currently around 23,163, on the charts that had held since May last year, raising the risk of a retest of the December 2010 low around 22,400.
The Shanghai Composite Index closed 0.3 percent higher, supported by a rally in the property sector, for a 1 percent gain on the holiday-shortened week.
Mainland markets have outperformed those in Hong Kong this month, taking the valuation premium at which Chinese A-shares trade over their Hong Kong-listed peers to the highest since May 2010, with some analysts predicting mainland markets to continue to outperform this year.
The property sub-index rose 1.7 percent and was up on the week after a tepid performance since mid-January as news of further policy tightening in China, in part to cool the red hot real estate market, weighed on the sector.
A report in an official newspaper which said house prices had continued to rise in January bolstered sentiment.
"The property sector has now priced in the negative news of property tax, so any positive news may boost it. Moreover, this sector's valuation is still low," said Wen Lijun, analyst at Nanjing Securities.
Vanke, the country largest developer and the most active issue on the Shenzhen market, rose 1 percent, while China Enterprise Co , the biggest gainer on the Shanghai market, jumpped to its 10 percent daily limit.
Economic data for January due next week is expected to show that lending surged and inflation accelerated, prompting concerns among some investors that the central bank could take more steps to control money supply and tighten policy, after raising interest rates this week.
HK ON THE BACKFOOT
Hong Kong's market has taken a hit as most North Asian markets succumbed to profit-taking, with South Korea's KOSPI dropping 4.6 percent on the week and Taiwan's TAIEX down nearly 6 percent.
With emerging market "dominoes" continuing to fall, clients are becoming increasingly nervous and are buying downside protection through put options, said a Hong Kong-based trader at a large U.S. investment bank.
"The S&P remains vulnerable at 1320, it needs to correct to even think about buying," said the trader.
In Hong Kong, shares of HSBC , which have supported the broader market through the week, fell 0.7 percent, limiting gains for the broader market even as other large caps recovered from the week's losses.
Tencent Holdings Ltd jumped 5.3 percent on healthy volume and resumed its upward trend that has seen shares of China's dominant internet gaming company rise 17 percent this year, easily outpacing the Hang Seng's 0.9 percent decline.
Hong Kong Exchanges & Clearing ended 0.7 percent higher after trading in the red for most of the day as short-sellers, who were very active in the counter on Thursday, covered some positions.
HKEx shares had slumped nearly 5 percent on over 7 times their average 30-day volume in the previous session with over 10 percent of the stock's turnover on the short side.
HKEx, the world's biggest stock exchange operator by market value, has been in the news this week as Western exchanges scramble to merge in an attempt to preserve market share as alternative venues and shrinking margins from cash equity trading threaten their business models.
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