Hong Kong shares rose on Friday, after robust U.S. data and renewed optimism of a second bailout deal for Greece spurred investors to cover short positions in riskier sectors, lifting the Hang Seng Index to its seventh-straight weekly gain.
Mainland Chinese markets were flat on the day, with the Shanghai Composite Index finishing up 0.01 percent on the day, paring gains after testing 2,372, a level that has capped gains for the last two sessions.
In 2012 to date, the Shanghai Composite is up 7.2 percent, while the Hang Seng Index is up 16.5 percent.
The China Enterprises Index of the top mainland listings in Hong Kong rose 1.2 percent, while the broader Hang Seng Index gained 1 percent to close at 21,491.6. This week, they gained 2.7 and 3.4 percent, respectively.
The next major resistance for the Hang Seng is at 21,725, the top end of the gap that had opened between Aug.4 and Aug. 5, and a level it has failed to break this week.
A-share turnover in Shanghai dipped below its 20-day moving average for only the third time in the last 11 sessions, while in Hong Kong, turnover was below its 20-day moving average, as when it was for the bulk of the week.
Turnover in Hong Kong this week, however, was the second-highest in 2012 to date, an improvement over late last year when investors stayed away after two violent selloffs in the third quarter.
Volumes have improved this year compared with late last year but they are not great, suggesting that some investors have yet to return to the market, said Haitong International equity strategist Edward Huang.
There is probably room for more upside, but we are almost back to levels before the selloff in the third quarter of last year, so investors might be careful about betting more on cyclical sectors that might have been laggards last year but whose growth prospects are dim, he said.
Aluminium Corporation of China (Chalco) is a case in point. It is up 23 percent this year so far after slumping 52 percent last year, although there has been no change in its fundamentals.
In fact, there are concerns a recent surge in imports of primary aluminium by China, the world's top producer and consumer of the metal, could hit a wall in April as weak domestic prices drive traders to cut new orders for spot metal.
The resources sector was broadly weaker on Friday after a Chinese newspaper said Beijing had raised a resources tax on iron, tin, molybdenum, magnesium, talc and boron to conserve resources and curb pollution, sparking fears among investors of its impact on earnings.
In Shanghai, Inner Mongolia Baotou Steel Union Co Ltd lost 1.2 percent, while Jinan Iron & Steel Co Ltd slipped 1.1 percent in relatively strong volume.
FINANCIALS STRONG, SUPPORT MARKETS
Weakness in resources was outweighed by strength in financials in Shanghai on Friday, but it eked out a 0.2 percent gain this week, the fifth-straight week it has done so.
Investors in China have been reluctant to step up their stock purchases, particularly as Beijing has shown great restraint in loosening monetary policy so far, despite few signs of slowing growth in the world's second-largest economy.
On Friday, China Life Insurance Co Ltd , the mainland's biggest life insurer, was among the top boosts on benchmark indices in both markets, up 1.8 percent in Shanghai and gaining 3.5 percent in Hong Kong.
It reported premium growth for January that at 12 percent year on year, was below the 16 percent at its biggest rival, Ping An Insurance (Group) Co of China Ltd , but above China Pacific Insurance Co Ltd's 4 percent.
In a report dated Feb. 16, Barclays analysts characterised China Life's figures as a sharp turnaround and surprisingly strong, but they remained cautious on its growth outlook, believing it may take at least one or two quarters for evidence of a sustained improvement in operations to emerge.