HONG KONG- Hong Kong stocks closed up 0.44 percent on Wednesday, driven by a strong performance by banking equities, but Shanghai closed down on profit-taking following a late spurt the previous day.
Dealers were paying close attention to the US economy after Fed Reserve Bank of Atlanta President Dennis Lockhart said he supports lifting rates in September barring an unexpected downturn in the world's top economy.
The Hong Kong dollar is pegged to the greenback, so the city is hit with higher borrowing costs when rates are raised in the United States.
Banking firms in Hong Kong seemed unaffected, however, leading gains with ICBC up 1.53 percent to $5.35, HSBC rising 1.79 percent to $71.20 and China Construction Bank putting on 0.16 percent to $6.34.
The Hang Seng Index put on 108.04 points to finish at 24,514.16 on turnover of HK$68.60 billion (US$8.85 billion).
Asia-focused British bank Standard Chartered announced after the closing bell Wednesday that net profit had plunged by more than a third in the first six months of the year, while shareholder dividends were slashed by half.
Net profit slumped 36.7 percent compared to the same period last year, with pre-tax profits nosediving 44 percent and revenue down eight percent.
Chinese internet giant Tencent was down 0.49 percent to HK$142.3 after Beijing announced plans to set up "network security offices" inside major online firms, as the government seeks to firm its grip on information circulating among the world's largest population of internet users.
Government moves 'hurting demand'
In Shanghai, trading closed down 1.65 percent due to profit-taking after gaining more than three percent the previous day on new short-selling limits.
The benchmark Shanghai Composite Index fell 61.97 points to 3,694.57 on turnover of 483.9 billion yuan (US$79.2 billion).
The Shenzhen Composite Index, which tracks stocks on China's second exchange, lost 1.05 percent, or 22.53 points, to 2,128.42 on turnover of 476.3 billion yuan.
Analysts said that recent government moves to stabilise the market were hurting buying demand.
"The measures by the government to restrict selling and the de-leveraging by margin traders have contributed to decreasing demand for stocks," Dai Ming, Shanghai-based fund manager at Hengsheng Asset Management, told Bloomberg News.
After the Shanghai market crashed 30 percent from its peak in mid-June, the government launched a broad intervention to stem the rout, with measures including banning major shareholders from selling.
The Shanghai and Shenzhen exchanges said late Monday that investors who borrow shares must wait until the next day to pay back the loans, instead of settling the same day as under previous rules.
Short-selling - a bet that the price of a stock will fall - requires investors to borrow the stocks they do not own to carry out the transaction.
Heavyweight financial shares fell in Shanghai. China Merchant Securities eased 2.12 percent to 21.72 yuan, China Construction Bank fell 2.10 percent to 6.06 yuan and New China Life Insurance lost 3.37 percent to 43.24 yuan.
Airlines also lost ground. In Shanghai, Air China slumped 6.11 percent to 11.53 yuan while Spring Airlines slid 5.97 percent to 107.43 yuan.