HK share seen lower as China inflation stokes tightening fears

HONG KONG: Hong Kong shares were expected to fall at the open on Monday as higher-than-expected inflation data from China raised concerns that the government will take additional measures to curb prices, including possibly another hike in interest rates.

Disappointing jobs data from the US on Friday also dashed hopes that the economy was emerging from a soft patch, although optimism over quarterly corporate earnings, scheduled to kick-off this week, limited declines.

Last week, Hong Kong's Hang Seng index closed higher for a third straight week gaining 1.5 percent on the week to end at 22,726.4, below the 250-day moving average that is currently near the 22,773.6 level.

Stocks are likely to give up some of those gains after Chinese inflation data, reported on Saturday, came in at the highest level in three years, increasing the chances that the central bank will keep raising interest rates.

A widening trade surplus as import growth fell to its slowest pace in 20 months also suggested that capital inflows will remain a challenge for authorities.

Short-covering -- partly responsible for gains in Chinese banks and property developers over the past two weeks -- is likely to ease as those investors with bearish views on the markets aim to go short again.

Elsewhere in Asia, Japan's Nikkei was down 0.4 percent while South Korea's KOSPI was trading 0.6 percent lower as of 0040 GMT.

Copyright Reuters, 2011