Hong Kong and China shares slipped on Friday, with trading most active in the auto sector, where investors dumped shares in a thin market on new restrictions on car sales in Beijing. The Hang Seng Index ended down 0.3 percent at 22,833.8 in a shortened session to post a slight gain of 0.5 percent on the week after two successive weeks of declines.
Shanghai's key stock index fell 0.7 percent, dropping below the 250-day moving average, although most analysts said the index would be rangebound until the end of the year. The Shanghai Composite is down 2 percent this week as a shortfall of funds in the financial system curbed the amount of cash available for stock trading. The money market is experiencing an acute squeeze after a series of official monetary tightening steps since mid-October.
News of Beijing's decision to limit car registrations to tackle traffic congestion in the capital prompted a sell off in auto stocks, although some analysts downplayed the move as a knee-jerk reaction. In Shanghai, top auto producer SAIC Motor and another major maker Chongqing Changan Automobile Co fell over 2 percent.
In Hong Kong, Dongfeng Motor Group Co Ltd fell 7.9 percent, the sharpest drop in more than two years. Brilliance China Automotive Holdings Ltd, the sole distributor of BMW cars in China, fell 7.5 percent to a two-month low. Brilliance China is up 147 percent this year.
Laprise said that while the overall impact would not be that big since Beijing accounted for about 5 percent of cars sold in China, investor appetite for auto shares had taken a hit. The outlook for the China's auto sector in 2011 had dimmed, analysts said, as it faced the expiration of government subsidies along with higher steel and labour costs, and the latest measures announced in Beijing.
Banking stocks were broadly higher, helping to limit some losses, on expectations that the recent liquidity squeeze in China's money market may delay the central bank's next tightening steps, traders said. China Everbright Bank, the most active stock of the day, rose 4.4 percent.