HONG KONG/SHANGHAI: China and Hong Kong shares rose slightly on Tuesday, Feb 1 as a jump in energy shares lifted the benchmarks but overall volume remained light ahead of the Lunar New Year holidays.
Chinese investors resisted making big bets ahead of a week long break which starts on Wednesday as manufacturing data released this morning pointed to persistent inflation pressures, further fueling concern over monetary tightening.
Shanghai's key stock index and the Hang Seng index both rose 0.2 percent by the midday trading break.
China's factories slowed a touch in January under the weight of monetary tightening, but input prices rose quickly, keeping the pressure on the government to tackle inflation despite easing growth.
A raft of anti-inflation measures which include China's first ever property tax, a hike in bank reserve ratios and a shortfall in the domestic money market has weighed on mainland markets and stalled a strong start to the year for Hong Kong shares.
"After the new year holiday, CPI data will soon be published which may increase the likelihood of more policy tightening," said an analyst at a commercial bank in Beijing.
But easing liquidity conditions in the money market, which had helped Shanghai stocks rebound 1.4 percent on Monday, continued to lend support.
China's benchmark short-term money market rate plunged over 450 basis points in early trade on Tuesday as holiday-related cash demand eased, traders said.
Higher crude oil prices overnight lifted oil counters, but also kept market players wary about the impact of rising energy prices at a time when Asian countries battle to tame inflation.
Oil retreated on Tuesday as China's factory growth slowed to a five-month low, signalling demand may not rise as quickly in the world's second-largest oil user, but Egypt's social upheaval kept Brent crude firmly above $100.
In Hong Kong, CNOOC rebounded, up 3.4 percent and the Hang Seng index's top performer, after its near 8 percent slide over the past two sessions. Petrochina rose 2.8 percent on healthy volumes.
Those rises helped the Hang Seng index gain for the first time in three sessions as a steady pick-up in short-selling since mid-January suggested some investors were betting on weakness to persist.
Bearish bets, particularly on Chinese stocks listed in Hong Kong, rose on Monday with the shorted volume on the iShares FTSE A50 China tracker fund rising to 32.1 percent of overall turnover, the highest in two weeks, as of the close.
Investors in Shanghai took profit in the water and high-speed rail sectors, which had rallied in recent sessions on the back of more government spending in these industries.
Anhui Water Resources Development fell 4.7 percent, while Guangdong No.2 Hydropower Engineering was down 4.6 percent.
Among high-speed rail shares, China CNR Corp dropped 2.6 percent, while CSR Corp fell 1.9 percent.
The push and pull between those optimistic on Chinese shares after their underperformance last year and those betting on further weakness is likely to keep market activity volatile after trading resumes in full earnest after the Lunar New Year.
Traders may soon have a way to hedge against that volatility in Hong Kong, however, after the Hang Seng Indexes Company, which owns and manages the benchmark indexes, launched a volatility index, its own version of Wall Street's "fear gauge," the VIX. - Reuters
Chinese investors resisted making big bets ahead of a week long break which starts on Wednesday as manufacturing data released this morning pointed to persistent inflation pressures, further fueling concern over monetary tightening.
Shanghai's key stock index and the Hang Seng index both rose 0.2 percent by the midday trading break.
China's factories slowed a touch in January under the weight of monetary tightening, but input prices rose quickly, keeping the pressure on the government to tackle inflation despite easing growth.
A raft of anti-inflation measures which include China's first ever property tax, a hike in bank reserve ratios and a shortfall in the domestic money market has weighed on mainland markets and stalled a strong start to the year for Hong Kong shares.
"After the new year holiday, CPI data will soon be published which may increase the likelihood of more policy tightening," said an analyst at a commercial bank in Beijing.
But easing liquidity conditions in the money market, which had helped Shanghai stocks rebound 1.4 percent on Monday, continued to lend support.
China's benchmark short-term money market rate plunged over 450 basis points in early trade on Tuesday as holiday-related cash demand eased, traders said.
Higher crude oil prices overnight lifted oil counters, but also kept market players wary about the impact of rising energy prices at a time when Asian countries battle to tame inflation.
Oil retreated on Tuesday as China's factory growth slowed to a five-month low, signalling demand may not rise as quickly in the world's second-largest oil user, but Egypt's social upheaval kept Brent crude firmly above $100.
In Hong Kong, CNOOC rebounded, up 3.4 percent and the Hang Seng index's top performer, after its near 8 percent slide over the past two sessions. Petrochina rose 2.8 percent on healthy volumes.
Those rises helped the Hang Seng index gain for the first time in three sessions as a steady pick-up in short-selling since mid-January suggested some investors were betting on weakness to persist.
Bearish bets, particularly on Chinese stocks listed in Hong Kong, rose on Monday with the shorted volume on the iShares FTSE A50 China tracker fund rising to 32.1 percent of overall turnover, the highest in two weeks, as of the close.
Investors in Shanghai took profit in the water and high-speed rail sectors, which had rallied in recent sessions on the back of more government spending in these industries.
Anhui Water Resources Development fell 4.7 percent, while Guangdong No.2 Hydropower Engineering was down 4.6 percent.
Among high-speed rail shares, China CNR Corp dropped 2.6 percent, while CSR Corp fell 1.9 percent.
The push and pull between those optimistic on Chinese shares after their underperformance last year and those betting on further weakness is likely to keep market activity volatile after trading resumes in full earnest after the Lunar New Year.
Traders may soon have a way to hedge against that volatility in Hong Kong, however, after the Hang Seng Indexes Company, which owns and manages the benchmark indexes, launched a volatility index, its own version of Wall Street's "fear gauge," the VIX. - Reuters
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