Hong Kong shares inched lower on Wednesday, with losses in property issues limited by strength in Chinese stocks, with speculation rife in the mainland that Beijing will soon loosen its policy position.
This comes after Premier Wen Jiabao late on Tuesday pledged that the government would fine-tune economic policy and maintain appropriate credit growth.
Many market watchers expect the government to begin easing its tight liquidity policy in the fourth quarter on slowing economic growth in the world's second-largest economy and hope that inflation has peaked.
The Shanghai Composite Index was up 0.6% at 2,424.6 points at midday, lifted by materials names, seen among those most likely to benefit from any easing moves as A-share turnover surged to the highest midday level since September 21.
Strength in materials also helped the China Enterprises Index of top Chinese listings in Hong Kong rise 0.75%, limiting losses in the broader market.
The Hang Seng Index was down 0.11% by the midday trading break, at the top end of its trading range on the day, at 18,947.77, but turnover remained low.
"Most are staying put at this point because short-term investors are wary of chasing the market beyond current levels and long-term investors are waiting for lower levels and a clear macro picture before re-entering," said Alex Wong, director of asset management at Ample Finance Group.
Henderson Land Development Co and New World Development Co were among the top percentage losers among Hang Seng Index components, down 3.2 and 2%, respectively.
In a report dated October 26, Barclays analysts said office rents in Hong Kong would likely fall by at least 10 to 15% in the next two years and could drop by as much as 40% in a "hard landing" scenario.
Weakness in mainland property, which along with Chinese banks have bled heavily since August as investors bet on a hard landing in China, also suggested some investors remained bearish on China.
China Overseas Land & Investment declined 1.5%. It has lost more than 32% in the last quarter, but has recovered some of its losses. It is up more than 15% in October to date.
STRENGTH IN RESOURCES STOCKS
Mainland shares were higher on strength in resources-related names, extending outperformance this week that has propelled gains in the broader Hong Kong and Shanghai markets.
Zijin Mining Group was up more than 7%, while China Shenhua Energy Co, the mainland's largest coal producer, gained 2.7%.
Anhui Conch Cement Co, which posted third-quarter earnings late on Tuesday that were slightly above expectations, jumped almost 4% in Shanghai and 5.5% in Hong Kong.
Aluminum Corp of China (Chalco) defied its worse-than-expected earnings and bleak forecast by posting strong gains, up 4.1% in Hong Kong and 2.8% in Shanghai.
