Hong Kong blue chips yesterday finished just 21.15 points higher in one of the slowest trading days this year, with the blame divided between Santa Claus and a weak Japanese yen.
The Hang Seng Index rose 0.18 per cent to 11,486.93 points, a pale imitation of Monday's bolder rebounds on Wall Street. Turnover was HK$5 billion, the 11th quietest trading day this year.
On Monday, the benchmark moved 0.33 point lower on $5.04 billion in trade value.
Brokers said they were already hearing 'Happy holidays' voicemail messages in calls to fund managers, many of whom have closed their books for the year. Not even a little window dressing would revive trade before the year was out although many were calling for a rally next month.
'The incentive to window dress is not as strong. Because the market has performed poorly [for the full year] there is no need to flip out gains at the end of the year,' Typhoon Eight Research managing director Lachlan Christie said.
At the same time Hong Kong has recovered nearly half of its year's losses since September 21, which means there is little incentive to improve further this year.
The absence of investors may have been a benefit yesterday in light of further weakness in the yen, which fell to a fresh three-year low on concerns that the Bank of Japan will sanction a lower trading range at its policy board meeting, which ends today.
Should this be the start of a sharp downward spiral then Hong Kong's monetary system would begin to feel the pressure, Bank of America currency strategist Frank Gong said.
Yesterday Hong Kong dollar one-year forwards weakened 10 basis points to 170 points above the spot rate, which Mr Gong described as 'no big deal'. However 'if regional currencies are going to depreciate substantially along with the yen, then people will get nervous about the peg'.
Asian currencies have shown uncharacteristic muscle in the face of recent yen weakness. The South Korean won gained yesterday despite the yen slaughter.
ING Barings economist Tim Condon said that continued delinkage of the won from the yen was possible as long as the Korean balance of payments remained in a strong surplus.
Japan will also hear the cries of protest from its neighbours.
'The authorities in Beijing are unlikely to remain passive in the event of a big depreciation in the yen,' Mr Condon said.
With fund managers on the bench, brokers are looking for trades that might entice the pluckier private investors.
Mr Christie said he had his eye on Seapower Resources, a cold storage company whose shares have plummeted 30.3 per cent to 2.3 cents after being slapped with a winding-up petition from creditors on Friday.
Based on its last set of figures - released in April - Mr Christie estimated the firm's break-up value was more than double its market capitalisation of $40 million.
'It might be worth taking a position ahead of results [tomorrow],' he said.
Prudential-Bache Securities research head Robert Rountree, meanwhile, was trying to put together a case as to why a weak yen would not drag down Asia. Juggling data showing weakening economic ties and higher yen debt in the region, Mr Rountree expected to be in the office until midnight proving the yen issue was a 'damp squib'.
11,486.93 (+ 21.15)
5.89 bln shares
11,486 (+ 26)
11,500 (+ 10)