Hong Kong shares kicked off the second quarter with a fourth-straight loss on Monday, dragged by further weakness in Sun Hung Kai Properties as funds rolled out of the property giant after its billionaire owners were arrested.
Better-than-expected official China manufacturing data on Sunday failed to cheer the market, which was hit by disappointing 2011 corporate results. No improvement is expected for first quarter earnings due in mid-April, which would fan fears that the slowdown in China is hurting profitability more than anticipated.
The Hang Seng Index shed 0.2 percent, while the China Enterprises Index of the top mainland listings in Hong Kong rose 0.2 percent as bourse turnover neared a 2-1/2-month low.
Mainland Chinese markets are shut for a three-day public holiday and will reopen on Thursday, while markets in Hong Kong will be closed on Wednesday and Friday.
It's a very weak market today, with volume low largely because it's going to be stop-start trading this week. Things also look like worsening with Sun Hung Kai and funds are now desperately getting out, said Jackson Wong, Tanrich Securities' vice-president for equity sales.
Sun Hung Kai Properties (SHKP), Asia's largest property developer by market value, fell 2.2 percent in almost five times its 30-day average volume -- standing out against lackluster turnover on the Hong Kong bourse.
SHKP has now lost a total of 15 percent in the two trading sessions since Hong Kong's Independent Commission Against Corruption (ICAC) last Thursday arrested SHKP Chairmen Raymond and Thomas Kwok.
No charges have been placed yet. A local English-language newspaper reported on Monday that SHKP's billionaire owners are due to appear in court next week with former chief secretary Rafael Hui, who was also arrested.
SHK's Hong Kong property sector peers were mixed. Sino Land , which shed 3.6 percent on Friday, rose 2.9 percent to regain last Friday's losses. New World Developments, off 2.4 percent on Friday, dove 3.8 percent.
Greenheart Group was also hurt by renewed corporate governance fears, slumping 9.2 percent after the largest shareholder in its parent, Sino-Forest Corp, said on Monday that it has proposed a restructuring plan for the embattled Chinese forestry company.
CHINA DATA SURPRISE SHRUGGED OFF
Chinese banks and growth-sensitive sectors were mixed despite the official China Purchasing Managers' Index (PMI) jumping to an 11-month high of 53.1 in March, up from February's 51 and comfortably beating forecasts of 50.5.
A similar survey by HSBC, focusing more on smaller companies, showed factory output fell for the fifth straight month.
Aluminium Corp of China Ltd (Chalco) slipped 1.9 percent after agreeing TO a deal to buy Ivanhoe Mining Ltd's controlling stake in Mongolian-focused coal miner SouthGobi Resources for $926 million.
Market observers said the wide disparity in the two PMI surveys released on Sunday did little to alleviate expectations of underwhelming first quarter earnings from Chinese companies, expected from mid-April.
Profits for China's industrial firms fell 5.2 percent in the first two month of 2012, according to the industrial profitability indicator for March, published by the National Bureau of Statistics (NBS) last Tuesday.
This comes after a bruising 2011 earnings season that concluded on March 31. According to Thomson Reuters StarMine, of the 68 percent of Chinese companies that have reported 2011 earnings, 74 percent missed expectations.
On Monday, Haier Electronics Group Co Ltd soared 8.2 percent in almost double its 30-day average volume after posting a 44 percent jump in 2011 net profit. It was one of the few companies to beat forecasts.
Monday's surge let Haier regain its losses from last week after a peer in the Chinese consumption sector, GOME Electrical Appliances Holdings Ltd, plunged last Wednesday after posting subpar earnings. That tumble triggered a slew of broker downgrades.
On Monday, UBS analysts upgraded Haier to buy from neutral, and lifted its price target from HK$10.86 to HK$11.50. It also named Haier as a preferred pick in the Chinese consumer sector, one of the biggest disappointments in the 2011 results season.