Chinese shares retreated on Tuesday and looked set to end the month flat to slightly lower as the cloudy outlook for growth in developed economies pushed investors to the sidelines.
The Shanghai Composite Index was down 0.47% at the midday break with global market weakness offsetting a generally strong corporate earnings performance from Chinese companies.
Hong Kong's benchmark Hang Seng Index ended Tuesday morning down 1.08% at 20,513.05 with a technical support level helping to limit declines.
Foxconn International Holdings led the index lower, slumping 8.3% after disappointing first-half results.
"The main factors are still widespread worries about a double-dip recession and questions about the sustainability of strong earnings from China," said Tony Tong, head of market strategy at China Everbright Group.
Foxconn International plunged after the world's largest contract cell phone maker slipped deeper into the red, hit by falling handset prices and higher costs.
Other index heavyweights were also weaker. HSBC Holdings Plc was down 1.7% and Tencent Holdings retreated 3%, suggesting the weakness was broad-based.
Turnover in Hong Kong has stayed stubbornly lacklustre in recent months with average daily turnover in August about 6% lower than that seen in the year to date.
"Wall Street's gains were short-lived and China's market is not breaking out of its range. The sharp slide from August 10 is making people a little nervous," said Jackson Wong, vice-president at Tanrich Securities.
The Hang Seng Index rose 10.2% from early July to August 9, although the accompanying low volumes suggest investors lacked conviction in the strength of the rally. It has fallen 6% since.
The index is now testing key support at the 61.8% retracement of that upmove and a significant breach opens up the possibility of a retest of the July low near 19,800.
SHANGHAI SLIPS
The Shanghai Composite Index was at 2,640.292 points by midday, after jumping 1.6% on Monday.
The index, which advanced 10% in July, was nearly flat in August as a slew of weak data by major economies from the United States to Japan sparked worries of a second dip.
However, the index appears to be finding a firm floor around its 60-day moving average, now at 2,557 points, as strong corporate earnings have pushed down Chinese share valuations.
China's 1,947 listed companies posted an average 41% increase in first-half net profit, although growth was likely to slow in the second half because of economic uncertainty, the Shanghai Securities News reported on Tuesday.
"If the global economy and the U.S. economy worsens, will it affect Chinese listed companies third-quarter earnings? The market is looking at the speed of recovery," said Zhang Yanbing, analyst at Zheshang Securities in Shanghai.
Analysts forecast the index to move in a narrow range, with the 2,728 level, the 120-day moving average, the next level of resistance.
Banks, among the most active stocks, were all lower. China Everbright Bank Co was down 1.7% and China Minsheng Banking Corp down 0.9%. Agricultural Bank of China, the morning's most actively traded stock, slipped 0.4%.
Airlines were also weak, reversing robust gains made after strong first-half year earnings.
China Eastern Airlines Corp dropped 3.6%, while Hainan Airlines Co fell 3.2%.
