Hong Kong shares have worst day in 3 weeks, China slips too

Fri Dec 21, 2012 12:05am EST

* HSI -0.8 pct, H-shares -1.1 pct, CSI300 -0.5 pct

* Investors cut risk ahead of holiday next week on cliff concerns

* A-shares outperform HK 3rd week in a row

* China alcohol sector hit by more contamination reports

By Clement Tan

HONG KONG, Dec 21 (Reuters) - Hong Kong shares suffered their worst loss in three weeks on Friday as investors reduced risky holdings at the end of the year's last full trading week when the Republican House Speaker abandoned his Plan B bill to avert a "fiscal cliff"."

Onshore Chinese markets also fell, with weakness in alcohol and resource-related sectors helping trim index gains on the week, but they are still set to outperform offshore peers for a third straight week.

The Hang Seng Index went into the midday trading break down 0.8 percent at 22,486.7, slipping from a 17-month high. If losses persist, this would be its worst day since Dec. 3. The benchmark is now down 0.5 percent on the week.

The China Enterprises Index of the top Chinese listings in Hong Kong fell 1.1 percent. It is now down 0.7 percent on the week. Both Hong Kong indexes are set for their first weekly loss in five.

On the mainland, the Shanghai Composite Index and the CSI300 of the top Shanghai and Shenzhen listings each fell 0.5 percent. On the week, they are still set for a third-straight weekly gain, up 0.3 and 0.8 percent.

"It certainly looks like people are cutting risk (in Hong Kong) before the holidays next week, but things are not that bad," said Benjamin Chang, chief executive officer of LBN Advisors, a firm that manages more than $400 million in two China funds.

Republican lawmakers delivered a stinging rebuke to their leader, House of Representatives Speaker John Boehner, late on Thursday when they failed to back an effort designed to extract concessions from President Barack Obama in fiscal cliff talks.

On Friday, Chinese banking and energy majors were among the biggest losers of the Hang Seng Index components. Industrial and Commercial Bank of China (ICBC) dived 2.1 percent, while China Coal Energy Co Ltd fell 1.8 percent.

A more than 40 percent bounce from July 12 lows had helped ICBC had return to its highest since early March on Thursday. Friday's losses trimmed ICBC's gains on the year to 18.9 percent, compared to the 22 percent jump on the Hang Seng Index.

Chinese alcohol counters were hit by fresh mainland media reports of more products containing the toxic plasticizer elements, crimping a mild December rebound from the November rout suffered when the first allegations first emerged.

Jiugui Liquor fell 3.3 percent, while the sector's premium brand Kweichow Moutai fell 0.6 percent. Moutai is now up 0.5 percent on the month after diving 12.7 percent in November, its worst monthly loss in more than two years.

Gold miners were also weak as gold prices neared four-month lows, as investors took profit on rare earth producers which outperformed earlier this week.

Shandong Gold shed 1.5 percent, while Inner Mongolia Baotou Steel Rare-Earth Group lost 1.7 percent, cutting its weekly gain to 11.8 percent.