By Clement Tan
Hong Kong - Mainland Chinese shares lingered at their lowest in nearly four years on Tuesday, crimping Hong Kong gains, as investors were cool to China's financial sector as one listed bank faced a problem involving wealth management products.
Strength in Chinese telcos further pointed to risk aversion, aggravated by weak US manufacturing data, pushing down Hong Kong midday turnover and Shanghai volumes to their lowest levels in four sessions.
The Hang Seng Index went into the midday trading break up 0.1 percent at 21,780.8. The index, up 18.1 percent in 2012, on Monday failed to scale chart resistance at about 22,000 for the second time in a month.
The China Enterprises Index of the top Chinese listings in Hong Kong slipped 0.1 percent. The CSI300 of the top Shanghai and Shenzhen listings was down 0.2 percent, while the Shanghai Composite Index shed 0.4 percent.
The H-share index is now up 5.1 percent on the year, while the CSI300 and Shanghai Composite are down 10.2 and 11.3 percent respectively, and on track for a third-straight year of declines.
Shanghai-listed Huaxia Bank, which fell 4.2 percent on Monday following media reports of a problem with a wealth management product, slipped another 0.2 percent on Monday.
The bank has blamed a weekend panic on a rogue employee who it said sold a high-risk investment vehicle without authorisation, a case highlighting the risks tied to the country's boom in loosely regulated wealth management products.
“The wealth management issue with Huaxia Bank is just a measure of how big the problem can be,” Hong Hao, Bank of Communications International Securities' chief China strategist, said.
“It was the baijiu (white spirits) sector and now it's the banks. Funds mandated to liquidate positions to cut losses will add to losses. It's a vicious cycle at the moment,” Hong added.
On Tuesday, the Chinese banking sector was again weak. Industrial and Commercial Bank of China slipped 0.3 percent in Shanghai and 0.8 percent to its lowest in two weeks in Hong Kong.
Investors took profits on the Macau gaming sector after revenue data late on Monday came in largely in line with expectations. Sands China fell 3.5 percent after rising almost 10 percent in the previous three weeks.
Weak US data raised doubts about the economic health in one of China's top export markets, and in turn, the sustainability of its slow recovery. China consumer and energy counters were also weak.
In Hong Kong, China-focused shoe retailer Belle International was down 2.7 percent, while China Shenhua Energy Co Ltd lost 1 percent in Hong Kong.
China Mobile and China Unicom each rose 1 percent, while China Telecom moved up 1.7 percent. - Reuters