Hong Kong shares slipped 0.7 percent on Thursday, dragged down by large caps in weak turnover ahead of upcoming key meetings in Europe and Chinese economic data over the next two days. The Hang Seng Index closed down 0.7 percent at 19,107.8 points, after hitting a 3-week high a day before.
Europe's debt crisis is becoming increasingly worrisome for investors who were hoping for a better year ahead for Chinese shares that are trading at the low-end of their historic valuations. One of China's top life insurers and a leading luxury auto dealer priced $2.3 billion in IPOs at the low end of expectations. The deals are part of a year-end rush of up to $7.6 billion in Hong Kong and mainland China IPOs this week as companies look to raise funds ahead of what some predict could be an even tougher year in 2012. Chow Tai Fook and Haitong Securities are expected to price $4.5 bln IPOs on Friday.
"These IPOs will probably affect mainland markets more than Hong Kong where capital mobility is not an issue," said Hong Hao, a global strategist with CICC in Beijing. "It's not the best time to place big positions going into the year end, particularly since there are no strong reasons to support doing so," Hong added.
The worst performer on Hang Seng Thursday was Li & Fung Ltd, which manages supply chains for retailers, losing 5 percent after an announcement by shareholder Temasek Holdings Pte Ltd on Thursday. Singapore state investor Temasek said it would raise up to S$600 million ($468 million) from the sale of zero coupon bonds exchangeable into shares of Li & Fung at a 40 percent premium. . Temasek holds a 3 percent stake in Li & Fung.
Bucking losses on the day was shipping company China Cosco Holdings Co Ltd. It surged more than 5 percent on almost four times average 30-day volume as investors piled into the oversold stock on hopes of a short-term rebound. Analysts on average expect the company to narrow its loss in 2012 before swinging to a profit in 2013, according to Thomson Reuters I/B/E/S. The Shanghai Composite Index ended down 0.1 percent at 2,329.8, bouncing off a 30-month intraday low and prompting some traders to speculate whether the index was forming a base from which to begin a more sustainable rally.
Shares of oil giants, PetroChina Co Ltd and Sinopec Corp were among the top drags on the Shanghai Composite, losing 0.2 and 0.6 percent respectively. The Shanghai benchmark briefly hit 2,302.6 in early trade, the ninth time since July last year that it has tested the 2,300-2,320 range.
Previous moves to these levels preceded official action on October 24 and a first cut in reserve requirements for commercial lenders in China late last Thursday. A sustained downward break of this support level could lead to an acceleration of losses. The index is down nearly 33 percent from its cycle-high of 3,478.01 hit last November and is one of Asia's worst performers over the period as monetary tightening, rising inflation and worries about the banking sector spooked investors. Retail investors, who dominate trading on mainland markets, have remained wary, pushing turnover on the Shanghai exchange to the lowest levels this year.
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