After reaching a 13-month high on Thursday, and adding more than 1,000 points in the two previous sessions, Hong Kong shares dropped on profit-taking and concerns that the market may be overextending itself. The Hang Seng lost 145.06 points, or 0.67%, to close at 21,623.45. For the week, however, the index was up 2.2%, its third consecutive weekly gain.
Investors and traders continue to focus on bank and financial stocks in Hong Kong. BOC Hong Kong closed lower by 7.11% after reaching a 13-month high on Thursday. ICBC lost 1.12%.
Some analysts believe today’s sell-off is not the beginning stage of a bear or capitulation point for the market. Sentiment still remains strong and the sell-off may be seen as a buying opportunity.
“Upside momentum is building again after today’s consolidation, and riding on the U.S. dollar’s weakness,” said Conita Hung, head of equity research at Delta Asia Financial, to Reuters Asia. “Further upside can be expected when unfrozen funds from IPOs return to the market next week, adding to the already high market liquidity.”
Shanghai Plummets
China’s Shanghai Composite Index closed 3.19% lower on Friday, below the all-important psychological level of 3,000. The Index was down as much as 3.9% during the session, and fell 0.9% for the week, snapping gains in the previous two weeks.
“The market is under the double pressure of heavy new supply and profit-taking,” said Qian Qimin, deputy head of research at Shenyin and Wanguo Securities in Shanghai, to Reuters Asia. “It has the potential to fall further. Near-term support is at the half-year moving average” now at 2,835 points.
The Shanghai has lost one-fifth of its value in August, its second worst monthly performance in 15 years, prompting a government pledge to support the market.
Nikkei Cuts Losses
Japan’s Nikkei closed down 0.7%, after falling as much as 1.4% in morning trading; the Index lost 0.7% for the week.
Trading was cautious with low volume ahead of the five-day holiday in Japan from September 19-23. In addition, the Nikkei had finished above its 25-day moving average in the previous session.
“A lot of investors are adjusting their positions, with both profit-taking and short-covering emerging depending on individual shares and how they have behaved recently,” said Hiroaki Osakabe, a fund manager at Chibagin Asset Management, to Reuters.
Selling in large banks, such as Mitsubishi UFJ Financial Group, was considered the primary reason for the poor performance in the Index. There is a deep concern about how financial policy of Japan’s new government will play out.
The new government’s minister for banking, Shizuka Kamei, said this week in a press conference that he would like to introduce a moratorium on some loan repayments to help small and midsized businesses and individuals struggling from the economic downturn, helped send bank shares lower.
However, comments from Finance Minister Hirohisa Fujii today hinted at skepticism about such a plan alleviated investor’s concerns.
“Bank shares were really hit by political risk this week, after those comments by Kamei, and what we saw today was a bit of position adjustment ahead of the weekend, helped out by the Finance Minister,” said Masayoshi Okamoto, head of dealing at Jujiya Securities, to Reuters.
“It’s not really as if anything’s been settled, after all.”
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