Hong Kong shares look set to snap a four-day winning streak on Friday with cyclicals leading losses after the Hang Seng Index ran into stiff resistance at around 21,000, with investors cautious ahead of fresh United States employment data.
Fears of the United States slipping into recession and the lingering euro zone crisis have combined to keep markets weak. Some market players are hoping the Federal Reserve will take measures to boost the economy at a policy meeting later this month.
"We really need some kind of positive news for the Hang Seng Index to break this resistance," Julius Baer's Greater China Equity Analyst Alan Lam told Reuters.
With China also not offering any respite after the central bank moved late last week to further decrease money supply , investors have little reason to hold long positions ahead of the weekend amid weak turnover.
The Hang Seng Index was down 1.32% at 20,313.99 by the midday trading break. The China Enterprises Index of top Chinese companies listed in Hong Kong lost 1.98%.
Esprit Holdings was the top loser among HSI components, down 9% after the Europe-focused clothing retailer warned of a sharp drop in full-year profit due to one-off restructuring costs.
China Construction Bank Corp, Industrial and Commercial Bank of China and CNOOC, with a combined 16.4% weighting on the benchmark index, were among top drags, with each falling well over 2%.
Along with HSBC Holdings, which has a 14.2% weighting, the four face stiff resistance on their own charts, making it unlikely that the benchmark will break through the 21,000 resistance level in the short term.
SHANGHAI DOWN, TURNOVER STAYS PERSISTENTLY LOW
The Shanghai Composite Index extended losses on Friday, down 1.28% at 2,523.30 as midday A-share turnover remained low, as it has been for most of this week.
The Shanghai Composite looks set for a fourth weekly loss in five weeks, with energy issues the top drags. PetroChina Co, China Petroleum & Chemical Corp (Sinopec) and China Shenhua Energy Co, each lost between 1 and 2%.
Market watchers said moves by the central bank late last week to further tighten money supply crimped flows into mainland equity markets this week and could limit any upside for the Shanghai benchmark.
While short-term interbank borrowing rates have rebounded after the announcement of the new measure, the liquidity drain and market disappointment of no monetary relaxation are expected to keep investors cautious in the near term.
