Shares in Shanghai plunged for a second straight day in Asia Friday, while Hong Kong gave up an early rally to finish in the red, despite a gain in key index component
In China, the Shanghai Composite Index dropped 128 points, or 4%, to 3,094.67, while Hong Kong's Hang Seng eased 61 points, or 0.3%, to 24,197.78 after holding up throughout the morning session. Stocks in Japan gained, with the Nikkei finishing higher by 78 points, or 0.6%, at 13,476.45.
"Earnings risk is rising. While concerns about financial system failure are easing and creating a better investing environment, fears about a deteriorating earnings environment will only grow," says Tim Rocks, chief Asia strategist at Macquarie Bank in Hong Kong.
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China Mobile rose 1.9% to HK$131.50, losing around a percentage point of its momentum along with the Hang Seng during the afternoon. The company announces quarterly earnings Monday, and investors hope the report will show that it's still the clear leader in the China telecom sector.
Elsewhere in Hong Kong trading, gainers were sparse. Despite surging commodity prices, related shares failed to perform.
slipped 2.8% to HK$9.82 on news that its mainland-listed A-shares fell below their IPO price of 16.70 yuan. In Shanghai, PetroChina tumbled 3.4% to 16.30 yuan.
Aluminum Corp. of China
fell 2.4% to HK$12.10, and
sank 3.3% to HK$7.37.
In Singapore, oil was selling for $114.88 a barrel, while gold rose to $944 an ounce, after pulling back overnight in New York.
Financials also lost ground in Hong Kong trading, as mainly long-only foreign funds unloaded positions in banks and insurance companies after a strong rally recently.
lost 0.2% to HK$130.70, and
Bank of China
fell 1.3% to HK$3.69.
China Life Insurance
dipped 1% to HK$28.75.
Trading volumes were stronger than they have been for the rest of the week, but still sluggish at HK$79.89 billion ($10.25 billion). Traders said they expect a trading range of around 23,700 to 25,000 to hold for the time being in the Hang Seng.
Shares on the Chinese mainland continued to fall as domestic investors digested this week's high inflation data and the potential drop-off in equity prices as lock-up periods for last year's IPOs expired.
Many Shanghai shares were performing significantly worse than their Hong Kong-listed rivals. For example,
plummeted the maximum daily limit of 10%, to 12.26 yuan, while in Hong Kong,
gained 0.7% to HK$15.42.
In Japan, the yen remained steady at 102.46 yen vs. the dollar. Exporters surged for the fourth straight session.
jumped 2.4% to 5070 yen, and
gained 2% to 306 yen.
, which has fallen back this week, mainly on short-term profit-taking, rose 5.1% to 55,300 yen.
Elsewhere in Asia, markets were mixed. South Korea's Kospi rose 0.2% to 1771.90, and Taiwan's Taiex lost 0.2% to 9074.34. Indian markets were closed for a public holiday.
Be sure to check out the Far East Portfolio at Stockpickr.com to find out which Indian and Chinese companies are making big moves and announcing major news.
Daniel M. Harrison is a business journalist specialising in European and emerging markets, in particular Asia. He has an MBA from BI, Norway and a blog at
. He lives in New York.