Hong Kong shares crept higher on Friday, but suffered their first weekly loss in three while the day's turnover hit a 8-1/2-month low, suggesting investors were staying away while seeing if Europe makes progress on its debt crisis at a weekend summit.
Weakness in commodities-related stocks partly contributed to the Hang Seng Index, from Tuesday on, shedding one-third of the 16 percent gain it had made between a trough on October 4 and Monday. Some of the stocks considered particularly sensitive to slowing growth in China alternated between market-leading gains and losses this week with most longer-term investors sitting out the action.
"It's fast becoming a gambling den of sorts. Fundamentals this week didn't change much from last week, but more people are staying out and we are seeing much more speculation," said Larry Jiang, Guotai Junan Securities' chief investment strategist in Hong Kong. Amid volatility in cyclical stocks, some funds are looking towards mainland consumer names as relatively safer bets, such as Haier Electronics Group Ltd , which is up almost 30 percent in October. "We will have to go back to consumption staples, especially high margin businesses," Lydia So, a portfolio manager and small-companies strategist at San Francisco-based Matthews Asia, said in Hong Kong this week.
"The reason is that it's a long-term cure for headaches," said So, adding that a lot of problems faced by small and medium-sized companies in China revolve around low margins. On Friday, the Hang Seng Index gained 0.2 percent but it declined 2.6 percent on the week to close at 18,025.7 points, with near-term support seen at the 50 percent Fibonacci retracement of its rise from 2008 troughs to 2010 highs, at about 17,833 points.
Weekly turnover on the Hong Kong bourse was the lowest since May this year.
While full data for Friday was not immediately available, short-selling interest has stayed below 10 percent for most of this week. But shorting stayed high among materials-related stocks. Excluding Friday, short selling averaged about 37 percent of turnover this week for steel producer Citic Pacific Ltd, exceeding 50 percent on Thursday for the first time in a month.
The top beta play among Hang Seng Index components, Citic Pacific was off 0.8 percent on the day and down 9.3 percent for the week. Materials stocks also weighed on mainland markets, with the Shanghai Composite Index down 0.6 percent at 2,317.3 points, a level not seen since March 2009, as A-share turnover tanked.
After hitting a peak on Monday, the Shanghai benchmark completely surrendered the 4 percent boost from news last week that a unit of China's sovereign wealth fund had started to buy more shares in the country's big banks. The Shanghai financial sub-index gained 0.8 percent on Friday, but declined 2.4 percent on the week, compared with the 4.7 percent decline for the Shanghai Composite.
PetroChina Co Ltd was the top drag in Shanghai, losing 0.9 percent after it said on Thursday that its refining losses may reach $7.8 billion this year if fuel prices stay at their current level the rest of 2011. In Hong Kong, PetroChina lost 0.6 percent after losing 2.6 percent on Thursday. Gold-related stocks continued to slide. The mainland's largest gold miner, Zijin Mining Group Co Ltd, lost 1.7 percent, hitting its lowest in slightly more than a year and going deep into oversold ground on the charts.