HONG KONG - Hong Kong shares ended flat on Monday as upbeat Chinese manufacturing data was offset by concerns over gridlock in talks to avert the fiscal cliff in Washington.
The benchmark Hang Seng Index closed 9.67 points lower at 22,656.92 on turnover of HK$28.79 billion (S$4.54 billion) in half-day trade ahead of the New Year break.
However, the market ended 22.91 per cent higher for the year, reversing the 20 per cent fall of 2011.
The last four months of the year saw the index rally 16.3 per cent as data out of China began to show a pick-up in the world's number two economy after several quarters of slowing that stoked fears of a hard landing.
Banking giant HSBC said its final purchasing managers' index (PMI) of the year hit 51.5, up from 50.5 in November and a fourth straight month of improvement.
A reading above 50 indicates expansion in the key manufacturing sector, while one below signals shrinkage.
The figures reinforce recent indications that the world's second-largest economy is finally emerging from its slumber.
"Such a momentum is likely to be sustained in the coming months when infrastructure construction runs into full speed and property market conditions stabilise," Qu Hongbin, HSBC's chief economist for China, said in the release.
However, traders have been spooked by the lack of progress by US lawmakers in reaching an agreement to avoid the deep spending cuts and tax hikes due to take effect on Tuesday and which are expected to tip the country into recession.
If talks fail on Monday President Barack Obama has demanded a vote on his fallback plan that would preserve lower tax rates for families on less than $250,000 a year and extend unemployment insurance for two million people.
China Life rallied 3.3 per cent to HK$25.35 and was the best-performing blue chip, while Citic Securities rose 1.9 per cent to HK$19.54 following a 10.7 per cent jump Friday.
For the year China property stocks were the big winners. China Overseas Land soared 78 per cent and China Resources Land climbed 69.1 per cent, while Hong Kong conglomerate Wharf finished up 72.7 per cent.
Chinese shares closed up 1.61 per cent at a seven-month high. The benchmark Shanghai Composite Index jumped 35.88 points to 2,269.13 on turnover of 105.5 billion yuan ($16.9 billion), the highest close since June 20.
The benchmark has gained 3.17 per cent this year and recovered more than 16 per cent since it dipped to a near four-year low of 1,949.46 on December 4.