Hong Kong shares snapped a six-session winning streak on Monday, dragged down by Chinese banks and developers, as investors took profits on some recent outperformers while waiting to see if there will be a Greek debt-swap deal that averts a default.
Soft mainland markets, which resumed trading after a week-long Chinese New Year break, weighed on Hong Kong after Beijing dashed hopes of many for a cut in bank reserve requirements over the lengthy holiday.
Global factors, including tepid U.S. growth numbers on Friday, also contributed to pulling down markets throughout Asia.
The Shanghai Composite Index slipped 1.5 percent to fall below the 2,300 level it only finished above in its last session. Turnover slumped to its lowest in five sessions.
The China Enterprises Index of the top mainland listings in Hong Kong lost 2.6 percent. The broader Hang Seng Index finished down 1.7 percent at 20,160.4, practically paring all of its gains from last week.
Weaker-than-expected U.S. data last Friday is not helping. Investors also watching what happens with Greece and whether the debt swap deal will pan out, said Jackson Wong, vice-president for equity sales at Tanrich Holdings.
The report late Friday of slower-than-expected annualised U.S. growth of 2.8 percent in the fourth quarter, albeit the fastest quarterly rate in 1-1/2 years, hit exporters hard, with Li & Fung Ltd losing almost 5 percent.
Wong added the outcome of a summit among European leaders, along with fresh U.S. data later on Monday, could spur the resumption of the rally that has bumped the Hang Seng Index up by almost 10 percent in January.
On Monday, the mainland's biggest lenders were among the top drags on the Hang Seng Index. Industrial and Commercial Bank of China (ICBC) bled 3 percent while China Construction Bank lost 2.3 percent.
Even with Monday's slide, CCB is up more than 12 percent in January. Between Jan. 9 and Jan. 27, short-selling accounted for 14 percent of its daily turnover.
ICBC also hit the Shanghai Composite, losing 2.1 percent. It was one of seven financial names among the top 10 drags, with the Shanghai financial sub-index down 2.2 percent.
CHINESE PROPERTY DEVELOPERS WEAK
Shares of Chinese property developers were also weak. Shanghai-listed Poly Real Estate and Shenzhen-listed China Vanke, among the leading lights in the sector, each lost more than 4 percent in strong volumes.
In Hong Kong, Country Garden Holdings Co Ltd slumped 11.3 percent in more than three times its 30-day average, leading percentage losses among Chinese property developers after Citi on Monday downgraded the stock from neutral to sell.
In a report, Citi property analysts said they see limited room for further sales growth in 2012 for Country Garden.
They expect a possible margin squeeze as its mass-market products will be more vulnerable in the downturn and price cuts at a lagging pace and to a larger extent will be necessary.
Tencent Holdings was among a handful of stocks bucking Monday's trend of weakness. The Hong Kong listing of the Chinese internet giant gained 1.7 percent, tracking strength in its U.S.-listed peers on Friday on reports that Facebook would file as soon as this Wednesday to do an initial public offering.