Hong Kong shares traded lower on Monday, as uncertainty about resolution of the world's debt crises and a setback for major index stock Citic Pacific depressed the market. The Hang Seng Index, which last week had its worst week since March, ended down 0.3 percent to 21,804.8 points. Turnover was the third lowest recorded in 2011.
Shares in Shanghai briefly hit a two-month high before ending down 0.1 percent. Citic Pacific saw the biggest percentage decline on the benchmark, hitting a 10-month low. It slumped 8.5 percent in volumes almost five times its 30-day average after the company said iron ore production from a mine in Australia would be delayed.
The delay prompted at least two brokerages, including CLSA and Goldman Sachs, to issue a "sell" rating on the stock.
Uncertainty about debt woes in the US and Europe are keeping many investors on the sidelines. Some investors are also awaiting corporate results before dipping into Chinese shares.
One view is that valuations are so low in China at present, shares are attractive in spite of macroeconomic problems and questions. "I'd be looking at China purely in terms of valuations but not in terms of macro-economics," Andrew Freris, BNP Paribas Wealth Management's chief Asia investment advisor, told Reuters Television.
In Hong Kong, turnover declined for the fourth-straight session on Monday, totalling HK$51.2 billion, about 24 percent below its 20-day moving average.
Gains in beleaguered Chinese banks limited losses in the broader market. Agricultural Bank of China (AgBank) gained nearly 3 percent on news that certain cornerstone investors would continue to remain invested in the shares, allaying some fears of large investors locking in gains.
Coupled with uncertainty over China's local government debt problems, buyers have stayed away despite valuations at or below those seen during the 2008 crisis. Even after Monday's jump, AgBank shares are still down more than 14 percent since the end of May.
AgBank gains lifted shares of larger peers, with Industrial and Commercial Bank of China (ICBC) and China Construction Bank each gaining about 1 percent. In Shanghai, shares initially rose but then were dragged down by resources stocks after the country's tax authority announced the submission for approval of a proposal to increase taxes on resources that could be expanded to include coal.
The Shanghai Composite Index, which rose 0.8 percent last week, closed down 0.1 percent to 2,816.6 points as A-share turnover on Monday increased marginally from Friday, exceeding its 20-day average by more than 16 percent.
PetroChina Co Ltd and China Shenhua Energy Co Ltd were among the biggest drags on the benchmark, losing 0.7 and 1.2 percent respectively.
Pharmaceutical names limited losses, surging for a second-straight session after local state-owned media reported on Friday that Beijing is expected to release its five-year plan for the country's biomedical industry at the end of July.
Beijing Tongrentang Co Ltd, a traditional Chinese medicine manufacturer with a market cap of about $3.3 billion, jumped 6 percent in more than five times its 30-day average volume on Monday. It gained 10 percent on Friday.