Hong Kong shares ended lower for the third consecutive session Tuesday, dragged lower by concerns of geopolitical tension on the Korean peninsula, while weakness in China's A-shares weighed on Chinese firms.
The Hang Seng Index declined 627.88 points, or 2.67%, to 22,896.14. It traded between 22,871.11 and 23,322.17. Market volume strengthened to HK$92.24 billion from HK$79.65 billion Monday.
North Korea fired scores of artillery rockets at South Korea's Big Yeonpyeong island Tuesday afternoon, inflaming simmering worries on the nuclear-armed peninsula and sending regional markets generally lower.
Still, analysts said they don't expect full-scale North-South Korea conflict, with Fitch saying such an occurrence would be 'very unlikely.' Still, the ratings agency added that it will review South Korea's ratings if it believes tensions could escalate.
While traders were waiting for clarity on the situation. Fulbright Securities General Manager Francis Lun said: 'Isn't that the North Koreans' usual tactic when they want something?' He said he expects any further fall in the Hong Kong market to be limited, with support at roughly 50% retracement of the Hang Seng Index's rally since Sept. 1.
The Hang Seng Index had risen from Aug. 31's closing level of 20,536 to a more than two-and-half year peak of 24,988 on Nov. 8. A 50% retracement would put support at 22,762.
Castor Pang, research director at Cinda International, said he believes Hong Kong market is still in a bull market. 'In a bull market, whenever the index falls below the 50-day moving average, it's usually a good buying opportunity,' Pang said.
The Hang Seng Index's 50-day moving average stood at 23,180.
In China, the Shanghai Composite Index ended 1.9% lower at 2,828.28, as investors there continued to fret over more tightening moves.
'We believe there is an increasing chance of the central bank raising interest rates before the end of the year to curb the surging inflation,' said Zhang Fan, a Shanghai-based analyst at UOB KayHian.
China's October consumer price index data issued earlier this month showed a higher-than-expected 4.4% year-on-year increase, stoking fears the People's Bank of China will raise interest rates to combat inflation pressure.
All 45 Hang Seng Index constituents ended in negative territory, with more than a third of the companies plunging by more than 3%.
Chinese firms tracked losses in mainland China, with Ping An leading losses. The insurer shed 4.4% to HK$89.35 after falling 1.0% Monday following its president's plan to retire early.
Citic Bank fell 4.0% to HK$5.50, Bank of China was down 4.0% at HK$4.10, and Citic Pacific shed 3.6% to HK$20.20.
Property firms continued to fall on the Hong Kong government's property tightening measures issued after the market closed Friday.
Cheung Kong was down 4.5% at HK$111.50, Sino Land shed 3.8% to HK$14.82, and Sun Hung Kai Properties fell 3.3% to HK$124.00.
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