Hong Kong, Chinese stocks fall

Hong Kong stocks traded lower on Tuesday, weighed by property and energy shares, as weak global markets gave investors further reason to take money off the table, following a warning on the United States' credit rating. Standard & Poor's on Monday lowered its credit outlook for the United States, citing risks that policymakers may not reach agreement on a plan to slash the huge federal budget deficit.
Turnover was just shy of HK$70 billion, a fresh April low, as the benchmark Hang Seng Index closed down 1.3 percent to 23,520.6, outperforming the Shanghai Composite Index, which dipped 1.9 percent to 2,999.0, its largest percentage fall in two months. "Fund flow concerns are coming up again," said Ben Kwong, Chief Operating Officer at KGI Asia Ltd. "It's too early to say that funds are flowing out, but what's clear is that the flow of funds into Hong Kong is slowing down."
There are worries that funds could be trickling out of the territory, evidenced by the weakening of the Hong Kong dollar in the last seven days, but Kwong said it was most likely not long-term funds. "We believe the Hong Kong Monetary Authority are deeply uncomfortable with the level of liquidity inflow due to the two QE programmes and the potential negative impact of a reversal," said Kevin Lai, a Daiwa analyst, in a note released on Tuesday.
The Hang Seng property sub index underperformed the broader market as it closed down 2.0 percent on the day, with China Overseas Land & Investment Ltd shedding 3.6 percent and China Resources Enterprise Ltd falling 4.2 percent. Some analysts expect support for the benchmark at its 50-day moving average, currently at 23,337.3.
China's main stock index tumbled 1.9 percent on Tuesday, its largest percentage fall in nearly two months, on profit-taking after recent gains, triggered by the global weakness. The benchmark Shanghai Composite Index ended down at 2,999.0 points, falling below the key 3,000-point level, after it rose 0.2 percent on Monday to a new five-month high.
"The weak global market sparked panic selling," said Zhang Qi, analyst at Haitong Securities in Shanghai. "But it may just hit investors' confidence. The index is still supported by ample liquidity."
Analysts expected the index could find support at a level of 2,950 points and face resistance around 3,100 points. The sub-index of financial issues dropped 2.5 percent, while almost all 16 banking shares listed on the Shanghai and Shenzhen markets fell. Industrial and Commercial Bank of China (ICBC), the mainland's largest bank by valuation, fell 2.4 percent, while Hua Xia Bank dropped 2.3 percent. Property shares also underformed, while shares of China Vanke, the mainland's biggest developer, fell 2 percent and Jiangxi Zhong Jiang Real Estate dropped 7.3 percent.