Hong Kong shares reversed course to end lower on Monday, dragged by weakness in financials, tracking how gains were pared on mainland markets ahead of earnings reports from key blue chips.
The Shanghai Composite Index, which at one point was up about 1.6 percent, ended with a 0.3 percent gain, still its highest close since Nov. 17. A-share turnover reached its highest since March 29.
Financials were key drags as the China Enterprises Index of the top mainland listings in Hong Kong slipped 1.3 percent and the broader Hang Seng Index lost 0.9 percent.
HSBC Holdings Plc, which reported earnings after the market close, was the biggest drag. It dropped 1.2 percent to close below HK$70 for the first time since Feb. 16.
The pending HSBC results caused jitters as analysts had widely diveraging earnings estimates and the report was coming against the backdrop of Europe's debt problems and everything the bank has done to restructure, said Jackson Wong, vice-president of equity sales at Tanrich Securities.
According to Thomson Reuters StarMine, the difference between the lowest and the highest earnings per share estimate was $0.26.
After markets closed on Monday, Europe's largest bank posted 2011 profits of $21.9 billion, up 15 percent on the year but just below the average Reuters forecast of $22.2 billion. Earnings per share were $0.96.
Hang Seng Bank, majority owned by HSBC, fell 1.6 percent ahead of its 2011 earnings. After markets closed, it posted 2011 net profit of HK$16.7 billion, bettering the Reuters consensus of HK$15.9 billion.
Airliners slumped on fears that escalating oil prices could hurt earnings. Air China slumped 5.9 percent to HK$5.59, barely above its Jan. 6 low at about HK$5.54. Losses came in volume almost five times its 30-day average, highest since April 13.
CHINESE AUTOMAKERS BOOSTED BY BEIJING MOVE
Mainland exchanges extended strong gains, with increasing turnover over the past week suggesting retail investors are returning after staying off the markets that have lost 33 percent in the last two years.
It was property last week and automakers today. Mainland investors are chasing momentum right now, eager to make some money and recoup losses of the last two years, said Cao Xuefeng, head of research at Huaxi Securities in Chengdu.
Gains in strong turnover during the past two sessions have coincided with lower short-term lending rates that pointed to looser money markets after banks obtained funds following a cut in required reserves that took effect on Friday.
On Monday, gains were broadly supported by strength in automakers after Beijing excluded foreign brands in a preliminary list of vehicle models approved for purchase by state agencies this year.
In Shanghai, Dongfeng Automobile Co Ltd, which has lost 54 percent in the past two years, rose by the 10 percent maximum to its highest since November. Volume was more than five times the 30-day average.
Anhui Jianghuai Automobile Co Ltd also rose the maximum 10 percent, while Shenzhen-listed Chongqing Changan Automobile Co Ltd jumped 5 percent in four times its 30-day average volume.
In Hong Kong, Great Wall Motor Co Ltd was jumped 5.5 percent and Geely Automobile Holdings Ltd gained 3.8 percent, both in volume double their respective 30-day averages.
in February, the Shanghai Composite has reversed its underperformance relative to Hong Kong markets in January.
The Shanghai benchmark is up 6.7 percent this month, outpacing the Hang Seng Index's 4.1 percent gain. The Shanghai Composite gained 4.2 percent in January, when the Hang Seng jumped 10.7 percent.