Hong Kong market fell on Friday after China’s inflation came in at higher-than-expected level, fuelling worries that the government would continue to tighten the monetary policy in a bid the dust off the likely inflationary risks.

Worries over limited liquidity into the onshore market due to the tightening monetary policy dragged China’s benchmark Shanghai Composite Index by 1.78 per cent to close at 2,243.00.

The benchmark Hang Seng Index dipped 90.24 points, or 0.4 per cent, to finish at 23,264.07. Turnover stood at HK$83.24 billion.

Headline year-on-year CPI inflation will likely remain below 3 per cent in the first half, but it could hit the 3.5 per cent or even 4.0 per cent in some months of the second half, Bank of America Merill Lynch China economist Lu Ting said.

Invesco chief investment officer Paul Chan said incoming liquidity was likely to continue back the upbeat momentum for the Hong Kong market, while shale gas developers and cement producers had the best potential to benefit from the Chinese economy recovery.

Material firms and property developers led the declines on concern the recent rally has made some shares overbought. China Shenhua (1088.HK [1]) slumped 3.8 per cent to finish at HK$33.25.