Hong Kong shares retreat after overbought signal as financials drop
HONG KONG (Nikkei Markets) -- Hong Kong shares pulled back from 21-month highs Tuesday after a commonly-followed technical indicator suggested that the market was overbought, with Cathay Pacific Airways and Chinese financial companies pacing losses.
The Hang Seng Index fell 0.3% to 25,308.29 by midday after rising as much as 0.2% earlier. The gauge's 14-day relative strength index, a measure of momentum, closed at 72.7 Monday, above the 70-level that some traders consider to be a signal that a security is poised to retreat.
Cathay Pacific slid 3% after MSCI said it will be dropped from its Hong Kong Index at the end of this month. China Life Insurance fell 0.8%, pacing declines by mainland financials. The decline follows a more than 7% increase last week and came even as its premium income rose 20% in the January to April period. China Construction Bank (CCB) shed 1.2% and Bank of Communications lost 0.8%.
The S&P 500 Index and the Nasdaq Composite Index rose to fresh records Monday, helped by a rally in energy stocks on higher crude prices. Investor sentiment remains buoyant after a market-favored candidate won French presidential elections and most U.S. companies reported better-than-expected quarterly results. The Nikkei Asia300 Index added 0.1%.
"The market is very much overbought currently and most technical indicators bear that out," said Louis Tse, asset management director at Hong Kong-based VC Brokerage, although he added that global markets remain in "good shape." "For me, the 25,500 level on the Hang Seng Index will provide good resistance."
The Shanghai Composite was down 0.3%, heading for its first loss in four days, while a gauge of Chinese stocks listed in Hong Kong was on course for its first decline in seven days. The Shenzhen equity benchmark was up 0.2%. The onshore traded yuan was flat against the dollar at 6.89.
Midea Group fell 0.8% in Shenzhen after the household appliance-maker's controlling shareholder He Xiangjian reportedly sold 32.3 million shares for 1.12 billion yuan ($163 million) on May 12 via a block trade.
Belle International Holdings slipped 0.2% after reporting an 18% drop in net profit for the year ended Feb. 28.
HSBC Holdings added 0.2%. The lender settled claims by a group of U.S. bondholders that it conspired with rivals to rig the Libor benchmark, Reuters reported, citing a New York court filing.
Hong Kong billionaire Li Ka-shing is exploring options, including a possible sale, for his fixed-line phone business Hutchison Global Communications, Bloomberg reported, citing people familiar with the matter. Hutchison Telecommunications Hong Kong Holdings, which owns HGC, jumped 4.8%.
CK Hutchison Holdings slipped less than 0.1% amid broad market losses. The conglomerate's mobile telecommunications division Three Group and U.S. gaming firm Razer have formed an alliance to target people playing electronic games by offering specific plans and devices, South China Morning Post reported.
Alibaba Group Holding rose 0.9% in U.S. trading Monday. Billionaire George Soros' Soros Fund Management has bought 107,200 American Depository Receipts in the e-commerce giant during the March quarter, according to a U.S. filing. Separately, Alibaba affiliate Ant Financial's initial public offering has been stalled until the end of next year at least, the Financial Times reported, citing bankers.
Fabric maker Texwinca Holdings plunged 9.8% after saying it expects profit after tax to fall about 60% for the year ended March 31.
-- Nimesh Vora and V.Phani Kumar
--Nikkei Markets is a real-time financial news service for South East Asia's markets published by Nikkei NewsRise Asia Pte Ltd, a Nikkei and NewsRise joint venture company. Nikkei Markets provides wide companies coverage in the region, including the Nikkei's Asia300 companies.