Hong Kong shares fell on Tuesday after a surprise drop in Chinese manufacturing and renewed worries over a eurozone debt deal did little to slow profit-booking after last month's rally, particularly in the property sector. Turnover was light as investors remained cautious ahead of market-moving events this week that include US payrolls data, a Group of 20 summit and key central bank meetings in the West.
The Hang Seng index fell 2.5 percent drifting lower through the day in line with other Asian markets. The China Enterprises index, one of Asia's top performing benchmarks last month, dropped 3.1 percent. On the mainland, the Shanghai Composite ended the day slightly higher, up 0.1 percent, supported by retail investors buying into the insurance sector on hopes of better investment income as the domestic stock market recovers.
China's official purchasing managers' index (PMI) for October came in weaker than expected, recording its lowest reading since February 2009 as weaker Western economies took a toll on factories. While lower input prices at China's factories also suggested that inflationary pressures in the manufacturing sector were easing, market players said it was still early to call for China to loosen its policy stance.
"Some had thought that China easing, when it comes, would benefit the property sector," said a Hong Kong-based trader at an American brokerage. Developers remained under pressure in Hong Kong with the sector index ending down 4 percent, the weakest of all the sub-indexes.
Bellwether Cheung Kong Holdings fell 4.7 percent while China Overseas Land, one of last month's best performing stocks, shed 6.7 percent. China Overseas rose nearly 30 percent last month. While China's moves to clamp down on its red-hot property sector has led to lower transaction levels and loans to developers have come off sharply, authorities have reiterated that they intend to keep a tight leash on the sector.
Analysts at Credit Suisse maintain their "underweight" stance on Chinese property stocks and say the recent rally is not sustainable. "29 October's State Council meeting re-emphasised tightening on property, and urged local governments to strictly implement tightening measures," said Credit Suisse in a note. Longfor Properties, which found itself the target of furious protests by existing homeowners over price cuts in Shanghai earlier this month, fell 5.2 percent while Evergrande slumped 5.8 percent.