Hong Kong shares suffer third weekly loss

Hong Kong shares fell 1.7 percent on Friday - taking the week's loss to 3.4 percent - as rising risk aversion and reduced optimism about monetary easing by Beijing hit Chinese energy, financial and property stocks. Losses were capped as benchmark indices held about technical supports in thin trading. Turnover on the Hong Kong bourse, which had its third straight weekly loss, was the lowest in four weeks.
Aside from worries about contagion as the eurozone's debt crisis rumbles on unabated, signs that China will only selectively ease policy, rather than have broad rate cuts, have hurt the market. Trading activity, particularly among Hong Kong's retail investors, has also moved increasingly towards speculative derivative instruments such as warrants at a time when slow turnover and market volatility make stock-picking tough.
"It's short-term trading on headlines, nothing too fundamental, said Francis Cheung, CLSA's managing director of China-Hong Kong Strategy. "Many sectors are looking very cheap, but with the world looking to be heading towards a recession, it won't be an easy time for equities ahead." Three-quarters of respondents in a Bank of America-Merrill Lynch fund manager survey this week expect a soft landing in the Chinese economy, with the world's second-largest economy delivering better than 7 percent growth in 2012.
On Friday, the Hang Seng Index closed at 18,491.2 points, after testing the 18,435 level, its low on October 24, in the morning. A gap that opened up on the charts between the high on October 23 at about 18,082.4 and the low on October 24 suggests there could be a steep fall should the 18,435 support level be breached.
The China Enterprises Index bounced off its 38.2 percent Fibonacci retracement of its rise from October 4 lows to November 9 highs, at about 9,917 points, to close down 2.7 percent at 9,957.4 points. It fell 4.5 percent this week. HSBC Holdings Plc, Europe's largest bank which has a 15 percent weighting on the Hang Seng Index, closed below HK$60 for the first time since October 6. It lost 4.2 percent this week in its lowest weekly volume in four weeks.
Shares of HSBC could face their worst monthly performance in two years, with some traders suggesting its 2011 closing low at HK$56.65 could be breached if the eurozone's debt crisis intensifies. The Shanghai Composite Index finished down 1.9 percent on the day at 2,416.6 points, the lowest in four weeks. Weakness in several large caps in low A-share turnover precipitated a 2.6 percent loss this week.
PetroChina Co Ltd, China Shenhua Energy Co Ltd and China Life Insurance were the Shanghai benchmark's top three drags, losing between 1 and 2.8 percent on the day. Sectors seen more sensitive to any policy changes, such as banks, also suffered, with mainland property developers particularly hard hit. Data on Friday showed China's average home prices in October fell for the first time in 2011.
China Vanke Co Ltd lost almost 3 percent in strong volume on Friday, finishing down 5.7 percent on the week. Poly Real Estate lost 5.9 percent for the week. In Hong Kong, China Overseas Land and China Resources Land saw some of the steepest percentage losses among Hang Seng Index components this week, losing 7 and 5.7 percent respectively. Short selling interest in China Overseas Land stayed above 12 percent this week, hitting a high of 89 percent of its total turnover on Wednesday.
In a reporting detailing their 2012 outlook for China markets on Wednesday, HSBC strategists said a soft landing for the housing market is their base scenario, with the trajectory of price correction making a difference to financial system stability, private consumption and stocks. The HSBC China strategy team revised its 2012 index targets by 4 to 20 percent and increased their portfolio beta from 1 to 1.2.