Hong Kong shares gained 1.2 percent on Tuesday as investors sought the perceived relative safety of companies selling to Chinese consumers at a time global risk aversion remains high. Although turnover on the Hong Kong bourse hit its highest in five sessions, this was largely due to the expiry of futures contracts. Volume still stayed below average, underlining how the wobbly economic outlook is keeping many investors on the sidelines.
Footwear retailer Belle International Holdings Ltd was the top performer among Hang Seng Index components and led gains in the sector, surging 8.8 percent in volume almost twice its 30-day average. Share-buyers appear to be hoping stocks such as Belle can maintain their margins in spite of weakening economic conditions, which can be expected to cut consumption.
The Hang Seng Index closed at 18,256.2 points, just above the 50 percent Fibonacci retracement of its rise from October 4 lows to October 28 highs, at about 18,225. On Tuesday, Want China Holdings Ltd and Tingyi (Cayman Islands) Holdings Corp, new additions to the Hang Seng benchmark from December 5, also saw gains in strong volumes.
Tingyi has gained 9.4 percent since the Hang Seng Index manager announced its addition on November 11, but short-selling interest in the stock has stayed at elevated levels, suggesting that speculators, and not just index funds, were active in the stock. Excluding Tuesday, short selling averaged 31.7 percent of Tingyi's total turnover in the last six sessions.
On Tuesday, bolstering the Chinese consumer story - or hopes - was strength in the Macau gaming stocks after sliding in the last three weeks. Sands China led gains in the sector, up 7.4 percent in good volume. It is now up 9.7 percent in two days this week alone after slumping more than 19 percent in the three weeks prior.
Mainland property stocks have been hit by declining home prices and sales numbers in the physical market, with their Hong Kong counterparts not faring any better. On Monday, data showed that mortgage loans drawn in the territory fell 17 percent in October from the previous month.
Goldman Sachs strategists closed a recent recommendation to go long on Chinese shares in Hong Kong and short on the S&P500, saying "the balance of risks is no longer attractive." The Shanghai Composite Index ended up 1.2 percent at 2,412.4 points, led by strong gains in material and energy names that lifted the benchmark off oversold levels on the charts.
The Shanghai energy sub-index was a relative outperformer, gaining 1.9 percent, while a similar gauge for materials-related stocks was up 1.7 percent. China Petroleum and Chemical Corp (Sinopec) gained 1.2 percent while top coal producers China Shenhua Energy Co Ltd and China Coal Energy Co Ltd gained 1.3 and 2.1 percent respectively. A-share turnover was the highest in five sessions, but was still some 25 percent below average ahead of Chinese manufacturing data for November due on Thursday.