Hong Kong shares edged higher on Monday morning, helped by gains on Wall Street, but the benchmark index pulled back from earlier gains as Shanghai stocks faltered, weighed down by property counters.
Energy issues were the top performers on the Hang Seng Index, led by CNOOC, as oil prices held at a two-year high. CNOOC climbed 3.5% to a record high.
The benchmark index was up 0.6% at 23,461.3 by the midday trading break. It had earlier risen as much as 1.2% but pared gains as the Shanghai Composite slipped into negative territory.
Shanghai's key index was down 0.2% at 2,837.9 at midday with transport plays weighing. The index is down about 13% for the year.
"This morning's run was just short-term relief after clarity on next year's monetary policy. The market was expecting this so upward momentum is limited," said Huatai Securities analyst Li Wenhui.
The Communist Party's top leaders declared that China would switch to a "prudent" monetary policy from a "moderately loose" stance, a move that was already priced in by the stock market, analysts said.
Transport issues pulled the Shanghai index lower, with SAIC Motor Corp down 1.9%, while Hainan Airlines Co dropped 2.6%. The sector has sharply outperformed the market in recent months.
A local newspaper report said Beijing would not extend tax incentives for small car purchases next year as the government moved to phase out stimulus measures that helped the country weather the global financial crisis.
Speculative retail investors, who account for the majority of turnover, have spurned large cap issues in recent months and instead focussed on sectors that received government support in the form of incentives or subsidies.
The operator of north China's biggest port, Dalian Port Co rose as much as 30% on its first day of trade after raising 5.7 bln yuan ($856 mln) in its downsized Shanghai public offering. The company was up 23% from its offering price by midday.
Oil major China Petroleum & Chemical Corp (Sinopec), the biggest boost to the index, rose 1.1%.
HK FIRM ON ENERGY
Oil majors CNOOC and Petrochina Co Ltd, up 2.5%, provided the biggest boost to the Hang Seng Index, as crude oil prices were supported by a weak dollar and expectations that a cold spell in the U.S. and Europe would underpin demand.
With a lack of local Asian economic data this week until China's trade data due on Friday, investors would focus on the resources sector with IPOs, new listings and merger activity, said traders at Standard Chartered.
The Hang Seng Index, up 7.6% this year, was facing chart resistance at the 38.9% retracement of its near 9% slide from November 8 to 26.
The index could also run into a "head and shoulders" pattern on the charts, with a dip below 22,680 paving the way for a further decline to 20,370 or the August low.
Turnover on the exchange has also fallen off since mid-November as lingering concern about inflation in China and worries about euro zone debt kept some investors from making big bets.
Sands China was active, falling 4.4% after the government of Macau unexpectedly turned down an application by the company to build a resort on two land parcels on the Cotai Strip.
