HK shares edge back to the black

PUBLISHED : Saturday, 13 August, 2011, 12:00am
UPDATED : Saturday, 13 August, 2011, 12:00am


Hong Kong shares ended the week not with a bang but a whimper, barely edging into the black yesterday as jittery investors hugged the sidelines after a traumatic week.

The benchmark Hang Seng Index ended the day just 0.13 per cent, or 24.87 points, up on its previous close, at 19,620.01 points.

Turnover of shares was down 31 per cent to a one-month low of HK$50 billion during the morning session before recovering to a day's total of K$75.4 billion - down 3.26 per cent from Thursday's closing turnover of HK$78 billion.

The bearish sentiment on the market follows the cutting of the United States' top-notch AAA credit rating by ratings agency Standard & Poor's, and a deepening crisis surrounding European sovereign debt.

Heavy sell-offs have brought some European markets into bear market territory, falling more than 20 per cent.

Germany plunged 25 per cent and Italy dived 24 per cent this month, meeting the technical definition of entering a bear market.

Hong Kong, meanwhile, has lost 12.6 per cent this month and investors remain skittish.

'Investors wanted to get into some of those stocks that have fallen a lot,' said Mark To, the head of research at Wing Fung Financial Group. 'But they are too scared to do it.'

Short-selling turnover yesterday was HK$7.53 billion, constituting 10 per cent of the overall stock market turnover - down from Thursday's 13 per cent.

Short-sellers usually borrow shares and sell them, aiming to buy them back when the stock falls to pocket the difference.

Analysts said investors were still shaken from the big sell-off in equities and the Hong Kong stock market was unlikely to rebound significantly, adding that short-selling was likely to prevail.

'What I am seeing now is a transition,' said Martin Marnick, a director at wealth manager Anand Rathi, adding that overall sentiment has been overly bearish given Asian markets' strong fundamentals.

While equity funds recorded outflow this month, emerging market bonds became a safe-haven choice for investors, according to EPFR Global, a research company.

EPFR said emerging markets bond funds took in over US$1 billion for the second time year-to-date and those focusing on local currency debt enjoyed their best week in over a year.

'Hong Kong stocks have oversold,' said Ben Kwong Man-bun, chief operating officer of KGI Asia. 'Unless the US and European market stabilise, the outlook for Hong Kong stocks is still uncertain.

'Investors don't want to be too aggressive in loading up stocks. They are not in the panic mode now but they are still very worried.'