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Hong Kong market dips while China stocks eke out small gains, as investors remain in 'observation mode'

Yujing Liu yujing.liu@scmp.com

Hong Kong stocks dipped while China-listed shares edged up, amid another day of cautious trading on Tuesday as China and the US continue working on an initial trade deal.

The Hang Seng Index dropped 0.2 per cent to 26,436.62. In China, markets reversed early losses and eked out small gains by the close. The Shanghai Composite Index ended 0.1 per cent, or 2.84 points, higher at 2,917.32. The Shenzhen Component Index added 0.4 per cent, while the ChiNext Index rose 0.8 per cent.

"Pretty much everyone is in observation mode right now," said Kevin Leung, executive director of investment strategy at Haitong International Securities. If the US pulls back scheduled tariffs on Chinese imports on Sunday, the Hang Seng Index stands a chance of rising above the 27,000-point level by the end of this year, he said.

"The market has priced in all the negatives, but at the same time I can't see anything substantially positive that could support a rebound," he added.

In Hong Kong, sportswear makers declined broadly, in what is likely to be a result of investors taking profits at year-end, Jefferies analysts led by John Chou said in a report on Tuesday. Retail sales at a selection of shopping malls across China reflect strong momentum this month, continuing from November, they said.

Li Ning tumbled 6.3 per cent to HK$23.8, Anta Sports dropped 4.3 per cent to HK$70.75 and Xtep International Holdings weakened by 2 per cent to HK$3.85.

The Hong Kong-listed shares of Alibaba Group Holding, which owns the South China Morning Post, recorded a second day of losses, following their inclusion in the Hang Seng Composite Index on Monday. The stock fell 0.6 per cent to HK$195.4, after declining 0.5 per cent on Monday.

On the mainland, the Postal Savings Bank of China, the country's biggest initial public offering since 2010, closed with a slight gain of 2 per cent at 5.61 yuan. While new stocks typically soar on their first day of trading in China, investors have been more cautious of late. Moreover, the listing has been met with suspicion about its valuation levels, and growing distrust in China's banking industry, which has been hit by several unexpected bailouts.

In addition, pig farmers weakened after a surge in pork prices accelerated China's consumer inflation in November, as revealed by the consumer price index released on Tuesday.

Muyuan Foodstuff, one of the largest pork producers in China, fell by 5.3 per cent to 84 yuan, as investors took profits on a strong rally this year amid worries over its future output. An outbreak of African swine flu has swept across China and sent pork prices soaring. The company's shares have gained 193 per cent so far this year.

This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2019 South China Morning Post Publishers Ltd. All rights reserved.

Copyright (c) 2019. South China Morning Post Publishers Ltd. All rights reserved.