HK shares close down 1pc, China property stocks drag

HONG KONG: Hong Kong shares closed at their lowest level in more than two years on Wednesday, underperforming most of Asia, with Chinese property names coming under immense short-selling pressures.

The Hang Seng Index closed down 1 percent at 18,824.17 points, while the China Enterprise Index of the top Hong Kong-listed Chinese firms declined 0.94 percent to finish at 9,822.67 points.

The Shanghai Composite Index closed up 2.66 percent at 2,512.96 points, its biggest daily gain in a month, outperforming most Asian peers after the market was boosted by bigger investors seen buying beaten down oil majors.

HIGHLIGHTS:

China property stocks came under renewed pressure, with Evergrande Real Estate Group Ltd declining almost 3 percent, and short-selling interest exceeded 24 percent of its turnover on the day. China Overseas Land & Investment Ltd declined almost 4 percent, with short selling interest at about 18 percent of its total turnover on Wednesday after averaging more than 42 percent over the last four sessions. China Overseas Land is down almost 30 percent on the quarter to date, poised for its worst quarterly performance in a decade.

One trader said some hedge fund managers were seen selling Chinese property stocks to hedge their portfolios after finding it difficult to sell their investments in bonds and credits of the Chinese property shares. Chinese property stocks have come under pressure for much of this quarter and selling is expected to extend into the next quarter as tightening measures take hold on the mainland. Official data on Monday showed a marginal easing of China's housing inflation in August as home prices in major cities remained flat for a second straight month.

Esprit Holdings Ltd lost another 11 percent on the day to sink to its lowest levels since January 2002. The beleaguered Europe-focused apparel retailer have now plunged more than 78 percent from its closing price last Wednesday since posting a worse-than-expected 98 percent decline in net profit for the year ended June.

Copyright Reuters, 2011