HONG KONG/SHANGHAI: Hong Kong stocks dropped to near a five-month closing low on Thursday, with sharp falls in airlines such as Air China and refiners, both hit by escalating oil prices.
The Shanghai Composite gained 0.6 percent, buoyed by coal miners on expectations that surging oil prices may lift demand for alternative energy sources.
Oil prices hit a fresh two-and-a-half-year peak on Thursday on concerns the bloody unrest in OPEC-member Libya could spread to other major producers in the region, especially Saudi Arabia.
The Hang Seng Index dropped 1.3 percent in decent volume after a volatile session that saw prices gain earlier on strong property counters. The China Enterprises Index of top locally listed mainland companies was down 1.6 percent.
"Investors are weighing the risk that higher oil prices may hamper the global economic recovery. There are not many bright lights seen in this scenario," said Tony Tong, analyst at China Everbright Group in Hong Kong.
Transport issues fell, with Air China slumping 4.9 percent. Cathay Pacific Airways Ltd, Asia's No.4 carrier by market value, slipped 1.4 percent. Shipping company Cosco Pacific Ltd was among the biggest losers, dropping 3.5 percent.
"Higher oil prices are going to affect everybody," said Fulbright Securities general manager Francis Lun in Hong Kong.
Refiner Sinopec dropped 4.3 percent. Oil major Petrochina , which has refinery assets, dropped 1.5 percent.
The resource sector, gold firms and upstream oil firms, may be more attractive to investors in an environment of rising oil prices, analysts said.
The broader market drop weighed on property counters that had gained earlier on relief over the lack of severe property market cooling measures in Hong Kong's budget address on Wednesday.
Sun Hung Kai Properties Ltd, Asia's largest developer by market value, was one of the best performing stocks, up 0.3 percent. Hong Kong's property sub-index was down 0.6 percent after trading up over 1 percent earlier.
MINERS STRONG
China's benchmark index closed up at 2,878.6 points in thin volume, after a 0.3 percent rise on Wednesday.
Some analysts attributed lacklustre trading to investor caution over the global economic outlook and the possibility that higher oil prices could boost inflation in China.
"Whether the global market will have more impact on our market, only time will confirm," said Zhang Yanbing, analyst at Zheshang Securities in Shanghai. "The index may hover around recent levels in the short term."
Almost all 32 coal-related companies listed on the Shanghai and Shenzhen markets rose. Shanxi Coal International Energy rose 2.7 percent, while Taiyuan Coal Gasification was up 4.1 percent.
Oil companies rebounded after falling over the past two days, with PetroChina, the biggest company by market value, up 0.7 percent and Offshore Oil Engineering rising 1 percent.
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