Hong Kong stocks rose on Friday, posting their biggest weekly returns in three months, as another session of healthy turnover suggested investors were growing in confidence. The benchmark Hang Seng Index closed up 1.3 percent on the day. On the week, the benchmark was up 3.4 percent.
Shanghai shares fall from two-month high, banks weaker The China Enterprises Index of locally listed mainland companies gained 1.3 percent despite weakness in the Shanghai market. Chinese financial counters and index heavyweight HSBC Holdings Plc were the biggest boost to the market.
"I think foreign investors are a little more comfortable with the interest rate environment in China," said Christian Keilland, head of Asia sales trading at institutional brokerage BTIG in Hong Kong. "But I think they're expressing their financial weighting through insurers more at the moment." The financials sub-sector rose 1.5 percent. Ping An jumped 3.6 percent, its biggest single-day jump in three months after it reported strong premium growth for January.
HSBC continued its climb, having gained 15 percent so far this year as optimism builds that the bank will increase its dividend payout when it reports results later this month. But financials remained the most active sector for short-selling, suggesting some investors were hedging positions. As a percentage of total traded value as of midday, 21 percent of the turnover in banking shares was shorted, according to traders at Standard Chartered. Bucking the broader uptrend in the market, BYD Co Ltd , the Chinese carmaker backed by Warren Buffett, fell 2.1 percent after it said it would cut car prices by up to 19 percent to lift its waning market share.
"That will certainly hurt their profit again," said Scott Laprise, an analyst at CLSA. "It may at least help volume, which could improve market share and brand recognition, and probably help build the network, but it's going to be very bad for investors. China's main stock index fell 0.9 percent on Friday as investors sold off large-cap shares on worries over further monetary tightening ahead of the weekend. The benchmark Shanghai Composite Index was at 2,899.8 points, after hitting a two-month high on Thursday and falling below the psychologically important 2,900 level. It is up 2.6 percent for the week.
The official China Securities Journal said on Friday that the market widely expected the PBOC to raise bank reserve requirement ratios soon because the size of the central bank's recent open market operations was too small to soak up huge funds flowing into the market.
"The index needs to correct after the rally over the past several days," said Chen Shaodan, a senior analyst at China Development Bank Securities in Beijing. "And worries over tightening has become a routine ahead of the weekend." The central bank has often announced policy decisions on Friday evenings. Turnover fell to 142 billion yuan from 167 billion yuan at Thursday, also indicating investors remained cautious to trade aggressively.
Some analysts said the index might pull back slightly, but it would recover and rise towards 3,000 in the coming weeks. Agricultural Bank of China, the thrid biggest bank by market capitalisation, was down 0.8 percent, while Everbright Bank fell 1.5 percent. Petrochina, the largest company by market capitalisation, fell 1 percent. Some property developers rebounded after official data showed property prices rose in most Chinese cities in January despite a government campaign to tame housing inflation. Beijing Dalong Weiye Real Estate Development rose 3.4 percent, while Meidu Holding was up 1.9 percent.