Hong Kong shares slipped to a five-month closing low on Monday, falling for a third consecutive session on mounting concerns that the euro zone's debt problems will hamper the global economic recovery.
The benchmark Hang Seng Index .HSI closed down 0.58 percent or 114.19 points at 19,550.89. The China Enterprises Index of top locally listed mainland Chinese stocks closed down 1.28 percent at 10,989.19.
Market turnover fell to HK$59.63 billion ($7.67 billion), its lowest level since Jan. 4, from Friday's HK$77.5 billion.
"The situation now has reversed. We are swinging back to fear, compared to previously, when we were on the greed side," said Ben Kwong, chief operating officer at KGI Asia.
"Overall market sentiment remains cautious. The situation in the overseas markets remains unclear and European financial instability is a concern," he said, predicting that the index could test 19,000 in the near term.
Funds that had been borrowing U.S. dollars at low interest rates to invest in higher-risk Asian stocks - known as carry trades - were unwinding their positions on the back of the strengthening U.S. dollar, now seen as a safe haven in the current market turmoil, dealers said.
"The market will perform weakly in coming weeks because of the European debt situation," said Steven Lam, vice-president at Karl-Thomson Securities. "The Hong Kong market is highly linked to the volatility of the U.S. dollar and if the U.S. dollar continues to strengthen, carry trades will slow. Investor sentiment is weak."
Chinese property developer China Resources Land (1109.HK) fell 0.96 percent, erasing its earlier 2.87 percent gain in early trade on news the company will join Hong Kong's benchmark blue-chip Hang Seng Index (HSI) .HSI on March 8, Hong Kong's stock index compiler said on Friday after its quarterly review. [ID:nTOE61409N]
China State Construction (3311.HK) fell 2.66 percent after it said it would team up with two investors for a HK$400 million ($51.5 million) bond subscription, of which it would subscribe for half. The move will help the expansion of its construction business and construction-related investments in China.
Shares of high-end fashion group Joyce Boutique (0647.HK) fell 13.33 percent after it said Allied Wisdom International would take the company private and buy all outstanding shares it did not already own in Joyce at a discount of HK$0.20 each, for HK$88 million.
SHANGHAI EDGES DOWN
China's key stock index edged down 0.14 percent in shrinking turnover, with the banking and property sectors soft as bank lending curbs and the outlook for more new share supplies weighed on the market.
The Shanghai Composite Index .SSEC ended at 2,935.174 points, extending the previous week's 1.7 percent loss, the third weekly fall in a row.
Gaining Shanghai A shares outnumbered losers by 489 to 378, while turnover slipped to a four-month low of 73 billion yuan ($11 billion) from Friday's 110 billion yuan.
Activity is expected to thin out in the run-up to the one-week holiday for the Lunar New Year, which begins on Feb. 14.
"Trade turned light and narrowly range-bound because of the holiday factor and investors are wary given uncertainty about January economic data (due on Thursday) and the share supply outlook," said Wen Lijun, analyst at Nanjing Securities.
Industrial & Commercial Bank of China (601398.SS), the world's biggest bank by market capital, slipped 0.41 percent while the Shanghai property sub-index .SSEP dropped 0.48 percent to 4,010.197 points.
ICBC said at its 2010 working meeting that it would stop offering more loans to property developers found hoarding land and may even call back loans, the Financial News reported on Monday. The bank also said it would keep a reasonable rate of credit growth this year and seek to reduce credit risks.
The market has been weighed down by worries about credit tightening and heavy supplies of new shares, fuelled by steady approvals of new initial public offerings.
Four new stocks will list on Tuesday including China First Heavy Industries (601106.SS), while five companies are taking subscriptions on Monday and Tuesday, including mid-sized Chinese brokerage Huatai Securities Co, which plans to raise as much as 17.26 billion yuan in China's biggest initial public offering this year. [ID:nTOE61601G]
"The pace of new share supplies is very fast," said Qian Xiangjing, senior analyst at CITIC-Kington Securities in Hangzhou, although he expected the index to hold within a 2,900 to 3,000 point range until next week's holiday.
Brokerage shares outperformed, with CITIC Securities (600030.SS) gaining 2.05 percent, in reaction to the relatively high valuation for Huatai's price setting.