Hong Kong shares slip, China flat

Hong Kong shares slipped on Wednesday, getting off to a weak start in June as investors took a more defensive stance, although a pick up in volumes suggested greater market participation by investors.
The macro backdrop was cloudy after a Chinese manufacturing gauge showed the slowest pace of activity in at least nine months, while power shortages as well the drought in the world's second biggest economy were becoming major concerns.
The banking sector dragged on the broader market after sources revealed exclusively to Reuters on Tuesday that China's regulators were planning a massive clean-up of billions of dollars of local government debt.
The Hang Seng index fell 0.2 percent to 23,626.4, a day after posting a solid 2.2 percent jump on Tuesday on strong volumes that traders attributed largely to month-end window dressing by portfolio managers.
MGM China will be the latest in a long line of big name listings in Hong Kong when it debuts on Thursday. The $1.5 billion IPO priced at the top of its indicative price range due to strong demand.
China Construction Bank, one of the top picks among banking analysts in China, fell 0.8 percent and was the third-biggest drag on the benchmark behind oil major CNOOC, down 1.1 percent, and HSBC which fell 0.6 percent.
Outside of financials, consumer goods exporter Li & Fung shares were up 3.2 percent after brokerage CLSA upgraded the stock to "outperform" from "underperform" based on recent weakness which has seen shares drop about 30 percent from their peak in February.
Fashion retailers such as Giordano International, up 2.8 percent, and I.T., up 4.4 percent, saw buyers rush in after Hong Kong retail sales rose 27.7 percent in April. China stocks finished flat on Wednesday amid uncertainty about how a Chinese central government plan to clean up billions of dollars of local government debt would impact the banking sector's bottom line.
China's largest lender, Industrial & Commercial Bank of China (ICBC) fell 1.8 percent while Bank of China slipped 0.3 percent.
The Shanghai financial sector index lost 0.8 percent on the day, the only sector underperforming the broader market as the benchmark Shanghai Composite Index finished flat at 2,743.6.
This follows the Shanghai Composite's worst monthly showing in a year. It lost 5.8 percent in May, pushing China's main stock index into negative territory on the year so far, underperforming its regional peers except Japan's benchmark Nikkei.
Coal and consumer staple plays curbed losses on the broad index with Kweichow Moutai, China's top alcohol producer with a market cap of US $26.7 billion, up almost 3 percent. Soaring demand for coal underpinned the moves higher in coal producers with China's top coal names gaining on the day. Yanzhou Coal gained 2.3 percent, while China's largest coal producer, China Shenhua Energy Co Ltd gained 0.9 percent.