HONG KONG - Hong Kong and China shares retreated on Tuesday, as investors took profit on mainland property and insurance counters, whose outperformance in recent weeks have helped benchmark indexes on both markets swell to multi-month highs.
Chinese property stocks sank after the official China Securities Journal said in a front page editorial that stricter implementation of curbs on the property sector is necessary to control home prices.
Weakness in the sector came after a strong rally as several smaller Chinese developers had successfully tapped the credit market in Hong Kong since the start of the year, improving their balance sheets without diluting equity stakes.
The Hang Seng Index fell 0.9 per cent to 23,111.2, its lowest this year after a strong start to 2013. The China Enterprises Index of the top Chinese listings in Hong Kong slumped 2.2 per cent.
In the mainland, the Shanghai Composite Index and the CSI300 of top Shanghai and Shenzhen listings each slipped 0.4 per cent from near seven-month closing highs. Both had closed at their highest since mid-June on Monday.
Losses in both markets came in relatively robust bourse volumes, but their relative strength index (RSI) values suggest mainland markets still remained in technically overbought territory.
"There's a lot of liquidity floating around in Hong Kong, so investors have to park their money somewhere in this risk-on environment," said Lee Wee Liat, BNP Paribas' head of Asia property research, referring to the rally in Chinese property shares.
"There won't be anything too draconian from Beijing, but if prices rise any more from here, I'd expect them to pre-emptively intervene by threatening to take away pre-sales rights and other measures that will hurt developers," Lee added.
On Tuesday, Longfor Properties and Evergrande fell 2.3 per cent and 1.5 per cent, respectively, in Hong Kong despite posting December sales that helped both companies exceed their stated 2012 targets.
Agile Property, whose Hong Kong shares surged 56 per cent in 2012, slumped 6.5 per cent in its worst day in 11 months after the company said that Hong Kong police has formally charged its chairman for indecent assault.
In the mainland, Poly Real Estate fell 1.2 per cent in Shanghai. A sub-index of property listings in Shanghai was an underperformer among sectors, down 1.2 per cent.
TRIPLE WHAMMY FOR CHINA INSURERS
Ping An Insurance suffered its worst daily loss in about 5-1/2 months in Hong Kong on Monday after sources told Reuters that state-run China Development Bank (CDB) has expressed concern over the funding behind Thailand's CP Group's attempt to buy HSBC's stake in China's second-largest insurer.
Ping An shares dived 4 per cent in Hong Kong in its worst loss since a 4.4 per cent tumble on July 23. Its Shanghai listing sank 3.7 per cent in its worst loss since Oct. 29. Ping An was among the biggest drags on benchmark indexes in China and Hong Kong.
Carlyle Group's unloading of its remaining stake in China Pacific Insurance (CPIC) sent shares of the mainland's third-largest insurer down 2.6 per cent in Hong Kong and 2.9 per cent in Shanghai.
Compounding a miserable day for Chinese insurers, shares of the sector's largest player China Life Insurance was hit by a CICC downgrade after its Hong Kong listing closed at its highest since May 2011.
China Life shed 3.3 per cent in Hong Kong and 3.2 per cent in Shanghai. A rebounding A-share market has helped the sector outperform in recent weeks. The sector was also helped by mainland regulators' move to allow eligible insurers to offer mutual fund products through their asset management arms.