HONG KONG: Hong Kong and China shares edged lower on Wednesday, poised for a fifth-straight session of losses in weak turnover that is expected to extend into final weeks of 2011, with most long funds seen done for the year.
Strength in utilities pointed to caution, with an uncertain outlook for the Chinese economy and the euro zone debt crisis likely to keep investors wary of risk going into the new year.
"Nobody quite knows how bad it will get early next year, so in such uncertainty, investors are understandably looking for safety," said Linus Yip, an equity strategist with First Shanghai Securities in Hong Kong.
The Hang Seng Index was down 0.18 percent at 18,413.79 at the midday trading break. The China Enterprises Index of the top mainland companies listed in Hong Kong lost 0.4 percent.
Turnover on the Hong Kong bourse stayed near a two-week low, but losses among some top beta names came in relatively stronger volume. Evergrande Real Estate Group Ltd slipped 3.3 percent in midday volume that exceeded its 30-day average after reporting a sharp drop in November sales.
The Chinese developer, whose Hong Kong listing is down more than 21 percent this year, also announced that it had stopped acquiring land, believing sales would remain very slow going into the second quarter of next year.
SHANGHAI TESTS LONG-TERM SUPPORT
The Shanghai Composite Index ended a choppy morning session down 0.1 percent at 2,245.6, barely holding on to a long-term chart support seen between 2,245 and 2,260 points.
Losses could accelerate if the Shanghai benchmark breaks decisively below this level, adding to bearish sentiment that could also weigh on Hong Kong.
"Things could get worse as we go into the Lunar New Year period at the end of January. The rush of new IPOs is going to compound the lack of support from low turnover," said Qian Qimin, co-director of research at Shenyin Wanguo Securities in Shanghai.
New China Life Insurance Co Ltd, the mainland's third-largest insurance life insurer, is expected to make its listing debut on Friday after pricing its $1.9 billion dual Hong Kong-Shanghai IPO at the low end of expectations.
In a sign of things to come, mainland media reported the China Securities Regulatory Commission (CSRC) may introduce a rule that allows only banks with at least 100 billion yuan ($15.7 billion) in assets to list on the stock market.
On Wednesday, industrial and materials companies, generally seen as more sensitive to economic growth, led losses. The Shanghai materials sub-index and a similar gauge for industrials were both down 0.2 percent.
China Petroleum & Chemical Corp (Sinopec), seen as the most sensitive to global oil prices among the three Chinese oil giants, was the Shanghai benchmark's top drag, tracking lower global oil prices with a 1.8 percent decline.
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