Update | Hong Kong, mainland stocks fall as investors turn cautious

Hong Kong stocks retreated from morning gains to close lower on Tuesday as mainland investors turned cautious ahead of the opening of the annual National People’s Congress on March 5.

The Hang Seng Index fell 0.73 per cent, or 229.94 points, to 31,268.66, snapping two days of gains. It had ended the morning session up by 0.1 per cent. The Hang Seng China Enterprises Index, or the H-share gauge, slid 1.46 per cent, or 187.52 points, to 12,646.54.

Mainland investors sold a net 3.09 billion yuan (US$489 million) of Hong Kong shares via the Shanghai- and Shenzhen-Hong Kong stock connects, the biggest outflows since December 2016, according to Bloomberg calculations.

Bloomberg cited unnamed sources as saying that China plans to cut its budget deficit target to 2.9 per cent of total economic output from 3 per cent.

The budget deficit target is subject to approval at the National People’s Congress, when other tightening policies designed to curb excessive lending risks in financial markets and to cut overcapacity in the economy may also be rolled out.

“There is profit-taking pressure in mainland big-caps,” said Wei Wei, a trader at Huaxi Securities in Shanghai. “Though the valuations are not stretched, some investors want to cash out.”

Internet giant Tencent Holdings was the most heavily traded stock, falling 1.55 per cent to HK$446.