The Hang Seng fell from a 16-month on Thursday as the onshore market consolidated after a robust rally in the previous two days, prompting investors to lock in profits in some overbought sectors.
The benchmark index lost 0.09 per cent, or 21.1 points, to finish at 22,249.8.
Short selling ratio stood at 7.2 per cent, with the total trading volume standing at 22,249.81.
CLSA strategist Francis Leung expects the Hang Seng Index to rise to 24,500 by the end of 2013, while the Hang Seng China Enterprises Index is expect hit 11,600 by that time.
There would not be big policy changes until 2014, Leung said. There will only be some incremental change in financial reform and pricing reform, he told reporters in a press conference in Hong Kong on Thursday.
“We do see some solid support to the Hong Kong market due to institutional investors’ allocation demands at year-end,” Leung said. Funds flew out of the utilities sectors and into the Chinese stocks, pushing up the HSCEI up 0.32 per cent to finish at 10,865.07.
Li & Fung added 1.9 per cent to finish at HK$12.92, as demand for US factory goods rose in October and the service sector expanded modestly in November.
JP Morgan said on Thursday that China’s economic outlook depended on two fundamental forces – cyclical recovery and structural slowdown. The house is expecting China's economy to growth by 8 per cent in 2013, compared with 7.6 per cent this year.