Hong Kong shares declined on Thursday, dragged down by weakness in the Chinese financial and consumer sectors, as investors took some profits on the final trading day before a four-day holiday weekend and ahead of U.S. jobs data on Friday.
Shanghai stocks climbed the most in two months after a three-day public holiday, however, with non-bank financials strong after Chinese Premier Wen Jiabao committed to liberalising the mainland's financial system.
Hong Kong's benchmark Hang Seng Index slipped 1 percent, though it was up 0.2 percent on the week to snap a two-week losing streak. It also managed to hold above 20,522, the March 7-low that has served as chart support in recent sessions.
It finished off lows after a private sector survey of purchasing managers showed that China's services sector expanded in March and business confidence hit an 11-month high, though overall activity remained below its long-term average.
It's good that we have bounced off lows for the day. People are getting some jitters about the U.S. jobs report on Good Friday and especially China data next week after the confusing PMI data last weekend, said Jackson Wong, Tanrich Securities' vice-president for equity sales.
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The Shanghai Composite Index gained 1.7 percent, while the CSI300, a broader gauge that also tracks some stocks listed in Shenzhen and more heavily weighted towards large caps, jumped 2.4 percent.
Gains in Shanghai came in the second-highest A-share turnover in two weeks, with investors taking well to news of potential fresh inflows, after Beijing said on Tuesday it would raise the total quota for its qualified foreign institutional investor programme (QFII).
Limits on the main channel for foreign investment in Chinese securities will be boosted by $50 billion to $80 billion, as the current programme nears its limit.
The increase in total quota and an accelerated QFII quota allocation process are positive for the A-share market, Jing Ulrich, JP Morgan's Chairman of Global Markets China, wrote in a note to clients on Thursday.
Although the $80 billion QFII quota will not be immediately allocated, the announcement sends a clear and positive message to international investors that the central government is encouraging further opening up of China's capital markets, she added.
In Hong Kong, Li & Fung Ltd, which manages supply chains for retailers including Wal-Mart Stores Inc and Target Corp, suffered its seventh loss in eight sessions, sliding 4 percent to the lowest since March 13,
On Thursday, its stock was hurt by dented hopes of quantitative easing by the U.S. Federal Reserve and ahead of fresh monthly U.S. employment data on Good Friday.
It has lost more than 13 percent since hitting an 11-month closing high on March 26 after its 2011 earnings exceeded forecasts, triggering a slew of brokerage upgrades.
But volume in the stock on Thursday was below average, mirroring the lacklustre turnover on the Hong Kong bourse on Thursday, which neared 2-1/2 month lows ahead of a slew of China data next week.
While Hong Kong markets will only resume trading next Tuesday, Beijing is expected to report March inflation data on Monday and trade figures on Tuesday. Mainland Chinese markets are open Friday and Monday.
March money supply and loan growth could be announced any time starting Tuesday, while first quarter gross domestic product as well as March investment output and retail sales be posted on Friday, April 13.
In Shanghai, the standout outperformers were non-bank financials, as they are seen as most likely to benefit from further attempts to liberalise the financial industry.
The mainland's biggest listed brokerages, Citic Securities and Haitong Securities were among the top performers on the Shanghai Composite Index, up 5.8 and 7.8 percent respectively.
The biggest Chinese banks were broadly weaker in Hong Kong and Shanghai. Industrial and Commercial Bank of China (ICBC), the mainland's biggest lender, slipped 1.6 percent in Hong Kong and 0.7 percent in Shanghai.
Chinese banks have underperformed the markets in Hong Kong this year. ICBC's H-share listing is up 9.1 percent in 2012, compared to the 11.7 percent gain for the Hang Seng Index over the same time period.
Premier Wen said late on Tuesday that the monopoly formed by the country's big banks needs to be broken to get money flowing to cash-starved private firms.