Hong Kong shares fell for a seventh straight session on Friday, with short sellers continuing to hit Chinese banking stocks and drive valuations further into single digits. Slowing economic growth and the prospect of tighter risk management rules have been making investors all week focus on how monetary policy will no longer aid the net interest margins of banks, which may also be forced to raise additional funds to satisfy capital adequacy requirements.
Hang Seng Index down for 7th day
Furthermore, the upcoming expiry of lock-up periods for the stakes that institutional investors have in some banks has also loomed bearishly over cheapened Chinese bank stocks. The benchmark Hang Seng Index closed down 0.8 percent on the day and fell 2.3 percent on the week to 22,420.4, its third straight weekly decline and the second time in the last month it has recorded seven straight daily losses. Trading volume trailed off after Thursday's spike.
Shares China Construction Bank Corp (CCB), China's second-biggest lender, fell 0.6 percent on the day. Its Hong Kong shares are trading at a forward 12-month earnings multiple of 7.9 times, more than 37 percent discount to historical levels, according to Thomson Reuters Starmine. "The Chinese Big 4 or 5 banks are not going to be in trouble," Emerging Alpha Advisors' Founder and Director, Marshall Mays told Reuters Television.
China property plays gained, with investors encouraged by a strong May sales numbers from China Overseas Land & Investment Ltd , which rose 3.9 percent on the day in Hong Kong. These positive vibes helped property plays on the mainland outperform on Friday, extending a recent rebound as the Shanghai property sub-index gained 1.0 percent on the day and 1.6 percent on the week.
A late rally pushed mainland China shares into positive territory on Friday, as buying of blue chip property and financial stocks lifted the benchmark off a near four-month low. But low volume showed that investors were reluctant to make big bets ahead of inflation data due next week, with Shanghai A-share turnover at a third of the average for the year so far.
The Shanghai Composite Index finished up 0.1 percent on the day but down 0.8 percent on the week to 2,705.1, bouncing off the 2,700 support for most of the last eight sessions. The index held just above its 2011 low at 2,661, recorded in January. "Lower export figures (released this morning) are not necessarily a bad thing," said Zhang Qi, an analyst with Haitong Securities.
The dollar-denominated B-share market slumped for a second day, driving the Shanghai B-share index to a 12.8 decline on the week, its worst in 2-1/2 years. Traders said it was driven partly by selling in the wake of a US regulatory warning about the risks surrounding Chinese companies, also weighed on the markets.