Hong Kong shares touched a 17-month high on Wednesday, buoyed by renewed hopes of a deal in the U.S. on spending cuts and tax hikes, but looming chart resistance could limit a market rally into the year's end.
Weakness in property stocks, standout outperformers this year, dragged mainland markets into the red. A fourth monthly price increase in five for home prices, on top of Beijing's reiteration that curbs will remain in place in 2013, has hurt the sector this week.
The Hang Seng Index went into the midday trading break up 0.7% at 22,652.8, its highest intra-day level since Aug. 1, 2011. Stiff chart resistance is next seen at about 22,800, peaks reached in July-August 2011.
The China Enterprises Index of the top Chinese listings in Hong Kong climbed 0.8% to its highest since March 12. It is now up 14.7% on the year, compared with the 22.9% jump on the Hang Seng Index.
In the mainland, the Shanghai Composite Index and CSI300 of the top Chinese listings both slipped 0.2%. Shanghai midday volume was its lowest since last Thursday.
The CSI300 has bounced up 12% since Dec. 3, when it was at its lowest since early 2009. The index, which fell in both 2010 and 2011, is now up 0.7% on the year. The Shanghai Composite is down 1.8% in 2012.
"I won't be surprised if turnover drops off as we close out 2012 and people go on holiday, stalling the rally. Most investors are already looking to the new year," said Edward Huang, Haitong International Securities' equity strategist.
"I think the market might be too optimistic on the pace of reform or additional policy support that the incoming Chinese leadership will take in 2013," Huang added.
On Wednesday, Chinese banking and energy majors were among the biggest boosts to the Hang Seng Index. The mainland's two largest banks, Industrial and Commercial Bank of China (ICBC) and China Construction Bank (CCB) rose 0.9 and 1.3%, respectively.
China Shenhua Energy Co Ltd climbed 2.6% to its highest in a month in Hong Kong and 0.8% in Shanghai.
The Australian Financial Review reported that China's biggest coal producer was told to come back with a full takeover offer after it had talked to Australia's Whitehaven Coal about taking a stake.
Chinese property shares in the onshore market were weak again, although those listed in Hong Kong rebounded after two days of falls.
Poly Real Estate shed 1.5% in Shanghai, but China Resources Land rose 1.7% in Hong Kong.
ESPRIT TAKES A TUMBLE
Bucking broader market strength, Esprit Holdings tumbled 5.7% to its lowest since Nov. 14, shaving 2012 gains to 19% after the Europe-focused retailer warned of a possible loss for the six months ending in December, triggering a raft of broker downgrades.
Morgan Stanley downgraded Esprit to "underweight" from "equal weight" while revising its earnings forecast for the year ending in June 2013 to a net loss of HK$144 million from the previous HK$695 million profit.
