HK,Shanghai stocks slip on weak cues

The Shanghai Composite Index was down 0.3 per cent by midday,with banking and property issues weighing.

The Hang Seng Index ended the morning off 0.34 per cent at 20,352.8,while the China Enterprises Index of top locally listed mainland companies was flat at 11,728.35.

Shanghai and Hong Kong are the region’s worst performing markets in the year to date,with the former down more than 17 per cent on fears Beijing may resort to more aggressive monetary policy tightening.

The Shanghai municipal government is holding the city’s most extensive land sale ever,as it moves to curb housing prices by increasing supply.

Sentiment was damped by investor anticipation of a flood of new share offerings from banks and an announcement that China’s securities regulator had not stopped reviewing IPO applications.

Analysts said large companies,including Agricultural Bank of China listing on the Shanghai stock exchange,would curb funds flowing into the broader market.

“A lack of positive news is weighing on the market,while the lower potential for funds entering the market is also adding pressure,” said Chen Shaodan,analyst at Stockfly Securities in Beijing. “We expect the index to move in a small range.”

Ping An Insurance fell 2.8 per cent in Hong Kong after a term sheet obtained by Reuters showed Newbridge Asia,a unit of buyout fund TPG,was selling 160 million shares in the company for up to $1.26 billion.

All 14 banks listed on the Shanghai and Shenzhen stock exchanges were lower by midday. Industrial and Commercial Bank of China (ICBC),the second-most active stock was down 1.1 per cent.

The Shanghai index’s 14-day relative strength index was at 30 points,a level below which a market is considered oversold.

Earlier in the week the index plumbed to a record low of 19,not seen since the Lehman Brothers crisis in 2008.

Trading volume remained low,indicating investors were cautious about taking new positions after a spike in volatility last week.

“As markets digested the latest multilateral effort to keep Greece’s fiscal woes from doing wider damage to the global recovery,investors sold perceived riskier asset classes during the second week of May,” fund-tracking firm EPFR said in a note.

Asia ex-Japan Equity funds had their worst week in well over a year,in terms of net flows,as emerging market equity funds as group sustained outflows of $2.1 billion during the week ending May 12,EPFR said.