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HK shares down as Shanghai sinks to 33-month low
December 12, 2011 / 9:40 AM / 6 years ago

HK shares down as Shanghai sinks to 33-month low

(Updates to close)

* HSI down 0.1 pct, Shanghai down 1 pct

* HSI briefly retook support level that broke on Friday

* Bearishness in weak turnover on both bourses

* Bets on aggressive China policy easing misplaced-CICC

By Clement Tan

HONG KONG, Dec 12 (Reuters) - Hong Kong shares reversed early gains to end 0.1 percent lower on Monday as the Shanghai Composite Index closed at its lowest since March 2009 on doubts that Beijing will loosen monetary policy enough to cause a growth spurt.

Property stocks fell sharply in the mainland after Xinhua News Agency on late Friday reported that Beijing would maintain its “unswerving stance” on tightening measures for the property market in the new year, citing a Communist Party Politburo meeting chaired by President Hu Jintao.

The Shanghai index, which had not been below 3,200 since March 2009, closed down 1 percent at 2,291.5 points. A-share turnover in Shanghai slumped to a fresh 3-year low.

In Hong Kong, turnover was the lowest in 10 sessions, ahead of the central government’s annual economic meeting, reported to be taking place this week by media in the mainland, as investors look for clues of possible monetary policy easing to prop up the slowing domestic economy.

On Nov. 30, China cut reserve requirements for commercial lenders for the first time in nearly three years. Since then, optimism on the mainland about seeing a series of easing moves to boost growth has dimmed.

“The smart money is not buying in either mainland or Hong Kong markets,” Hong Hao, a Beijing-based global equity strategist with China International Capital Corp (CICC), told Reuters.

“The government is still very reluctant to release curbs on property. While it is stuck between a rock and a hard place, Beijing runs the risk of going behind the monetary policy curve at this pace,” Hong added.

On Monday, the Hang Seng finished at 18,575.7 points, after earlier retaking the 18,818 level in morning trade, a level that had served as support for more than a week before Friday.

The Shanghai Composite Index closed down 1 percent at 2,291.5 points, underperforming Asian peers. The China Enterprises Index of the top mainland shares listed in Hong Kong finished down 0.1 percent.

In Shanghai, the two biggest property developers, China Vanke Co Ltd and Poly Real Estate Group Co Ltd , declined 3.2 and 3.5 percent respectively. Anhui Conch Cement lost 2.9 percent.

In Hong Kong, stocks seen as proxies for the onshore A-share market led the reversal after the midday break. China insurers and brokerages were among the biggest drags on benchmarks.

China Life Insurance Co Ltd, which has sizable A-share investments, lost 1.7 percent, while Citic Securities Co Ltd, the mainland’s biggest securities firm, bled 4.3 percent.

Underscoring fragile market confidence, Haitong Securities Co Ltd, China’s No.2 brokerage by assets, pulled its planned Hong Kong stock offering of up to $1.7 billion due to poor market conditions, sources said on Monday.

MILD CHINA STIMULUS SEEN

A note by Hong of CICC on Monday warned that investors betting on aggressive easing may be disappointed, suggesting any monetary policy loosening is merely going to offset the slowdown in the China economy, rather than change economic trajectory.

A Reuters poll on Monday suggested that China will not resort to aggressive policies to stimulate its cooling economy in 2012, with only a sharp slowdown in growth below 8 percent likely to trigger interest rate cuts or fresh fiscal spending.

The Hang Seng Index and the China Enterprise Index are down more than 18 and 20 percent respectively this year, ranking among the worst performers in Asia this year -- largely on the strength of a sell-off in the third quarter as investors priced in a “hard landing” in China.

Recent signs suggest that mainland markets, which are largely closed to foreign investors, are performing relatively worse than the H-share market.

Despite’s Monday losses, the China Enterprises Index , also known as the H-share index, is up 5.8 percent in December, while the Shanghai Composite is down 1.8 percent. (Editing by Richard Borsuk)

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