Hong Kong, China shares post weekly gains

Hong Kong and China shares ended the week higher, helped by gains in financial stocks on hopes of more policy easing by Beijing, although volume in the territory's stocks fell to a three-month low because of renewed uncertainty over Europe. Earlier this week, the official Xinhua news agency quoted an unidentified central bank official as saying China will increase liquidity both through open market operations and by cutting banks' reserve requirements to steer the economy towards a soft landing.
That triggered cautious buying in Chinese financials that had already dropped because of weak 2011 earnings and would directly benefit from any monetary easing. The Hang Seng index ended the day up 0.1 percent and up 1.5 percent on the week. On the mainland, the Shanghai Composite rose 1.2 percent bringing its weekly gains to 2 percent. The CSI300 index on which China's stock index futures are based rose 1.8 percent on the week.
"This remains a policy-driven market and all eyes are on China," said Norman Chan, head of investments at wealth manager Calibre Asset Management, which invests in Chinese and Asian funds, and has a preference for consumption-related names. Chan said they have a 16 percent weight in their fund portfolios dedicated to Chinese stocks while their overall allocation to equities has risen to 75 percent of all assets from about 65 percent at the end of last year.
"It won't be smooth but I still think 2012 is going to be an up year. We've seen the first stage of the market turnaround last quarter and now investors need to be selective about picking stocks," said Chan. Global investors were wary heading into the weekend after renewed worries on the eurozone debt crisis kept riskier assets under pressure after a better-than-feared Spanish bond auction failed to allay concerns that Spain may follow Greece, Ireland and Portugal in needing an international bailout.
Hong Kong investors took profits on recent outperformers such as internet firm Tencent Holdings which hit a series of record highs this week. Tencent shares fell 1.4 percent on Friday but were still up about 4 percent on the week. The 14-day relative strength index of Tencent's shares rose to as high as 76.5 this week surpassing the 70-level that indicates the stock is overbought, prompting technical analysts at brokerage CLSA to recommend profit-booking in the stock.
Retailers were the top performers on Friday with Want China, which sells food and beverages, up 3.6 percent and the biggest gainer among Hang Seng constituents. Italian fashion house Prada rose 4.6 percent. Chinese insurers which had rallied on Thursday with strong volume in Hong Kong and Shanghai on speculation China's industry regulator would expand investment options for the sector, also held onto gains.
China Life, the country's biggest insurer, rose 0.5 percent helping the Hang Seng index close just above its 50-day moving average, currently at 20,990.8. Late on Friday, China's No 2 brokerage by assets Haitong Securities priced its $1.7 billion Hong Kong shares offering near the bottom of an indicative range on Friday, leaving room for its shares to climb at the start of trading. Good demand for the shares as well as sustained strength in mainland markets could revive interest in Chinese brokers such as Citic Securities, the biggest player in the sector.