Hong Kong stocks fell for the first time in six days, led by mainland property developers, after China’s onshore market closed lower after a week-long break.
“Hong Kong investors are worried that a suddenreleasing a the release of the mega size of restricted A shares would soak up the liquidity of the onshore market,” said Francis Kwok, executive director at Bright Smart Securities & Commodities Group. “Meanwhile, people were a bit disappointed today as they were expecting stronger policies to save the market.”
The benchmark Hang Seng Index lost 187.82 points, or 0.9 per cent, to finish at 20,824.56. The Hang Seng China Enterprises Index closed 125.34 points, or 1.26 per cent, at 9,839.84.
The Shanghai Composite Index lost 11.75 points, or 0.56 per cent, to finish at 2074.42.
Mainland property developers led declines after local media said sales remain weak during the Golden Week holiday, normally a traditional sales peak for developers. China Overseas lost 3.03 per cent to finish at HK$19.20.
Yet Kwok, who forecasts that the Shanghai Composite Index will rise to between 2,300 and 2,400 by the end of this year, said Monday's fall was only a technical retreat after a rally ahead of Golden Week.
“Overall I'm bullish on the Hong Kong and China markets in the fourth quarter, given their cheap valuations. Cash positions at fund houses are too high and they need to build some positions at current levels,” he said.
China’s service sector growth picked up in September, rising to 50.3 from 49.9 in August, according to HSBC Composite PMI data released early on Monday.
“This is likely an indication of a gradual improvement of domestic economic conditions due to earlier easing measures and stronger consumption demand in the run-up to Golden Week,” Hongbin Qu, Chief Economist, China & Co-Head of Asian Economic Research at HSBC, said in an emailed note to clients.
Hong Kong retail stocks fell sharply on Monday on worries that the city was losing its appeal to Chinese customers as a shopping paradise after it registered negative growth in luxury goods sales during the past 8-day national holiday.
Jeweller Luk Fook (0590.HK ) lost 7.89 per cent to finish at HK$21.60. Watch distributor Hengdeli Holdings (3389.HK ) shed 5.45 per cent to finish at HK$2.08, while its competitor Oriental Watch Holdings (0398.HK ) dropped 3.83 per cent to end at HK$2.26.
Purchase of luxury goods by mainland visitors in Hong Kong could fall at least 10 per cent from a year ago during the Golden Week, said Joseph Tung, executive director of the Travel Industry Council. The eight-day holiday started on September 30 and ended on Sunday.
“Big transactions by mainland visitors are falling as economic growth slows and big spenders will go to Europe to hung for bargains because the (euro zone) crisis makes goods there pretty cheap,” said Forrest Chan, an analyst with CCB International Securities.
“The situation won’t improve in the fourth quarter. I won’t be surprised to see more funds withdraw from this sector to lock in earlier profit,” Chan said.
The market had priced in a strong recovery for retail stocks in September after a surprise extension of quantitative easing in the US last month boosted gold prices and Hong Kong saw double-digit growth in the number mainland visitors.
But data released last Thursday revealed that total retail sales of jewellery, clocks, watches and other valuables fell by 3.4 per cent in Hong Kong in August, bigger than declines in retail sales of other type of goods.
ZTE (0763.HK ) lost 5.97 per cent to finish at HK$12.60 after a US Congressional report said ZTE and competitor Huawei Technologies of posing a security threat, increasing the risk that both firms could be shut out of the US market.