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HK shares poised for first loss this week, China down

Fri Sep 2, 2011 1:22am EDT

* Hang Seng Index, Shanghai Composite down 1.3 pct
* Cyclicals lead retreat, investors unwind positions
* 21,000 seen as near-term HSI resistance
* Limited liquidity seen squeezing mainland markets
By Clement Tan

HONG KONG, Sept 2 (Reuters) - Hong Kong shares look set to snap a four-day winning streak
on Friday with cyclicals leading losses after the Hang Seng Index ran into stiff resistance at
around 21,000, with investors cautious ahead of fresh United States employment data.
Fears of the United States slipping into recession and the lingering euro zone crisis have
combined to keep markets weak. Some market players are hoping the Federal Reserve
will take measures to boost the economy at a policy meeting later this month.
"We really need some kind of positive news for the Hang Seng Index to break this resistance,"
Julius Baer's Greater China Equity Analyst Alan Lam told Reuters.
With China also not offering any respite after the central bank moved late last week to further
decrease money supply , investors have little reason to hold long positions ahead of the
weekend amid weak turnover.
The Hang Seng Index was down 1.32 percent at 20,313.99 by the midday trading break.
The China Enterprises Index of top Chinese companies listed in Hong Kong lost 1.98 percent.
Esprit Holdings Ltd was the top loser among HSI components, down 9 percent after the
Europe-focused clothing retailer warned of a sharp drop in full-year profit due to one-off
restructuring costs.
China Construction Bank Corp , Industrial and Commercial Bank of China Ltd and CNOOC Ltd ,
with a combined 16.4 percent weighting on the benchmark index, were among top drags,
with each falling well over 2 percent.

Along with HSBC Holdings Plc , which has a 14.2 percent weighting, the four face stiff
resistance on their own charts, making it unlikely that the benchmark will break
through the 21,000 resistance level in the short term.

SHANGHAI DOWN, TURNOVER STAYS PERSISTENTLY LOW

The Shanghai Composite Index extended losses on Friday, down 1.28 percent at
2,523.30 as midday A-share turnover remained low, as it has been for most of this week.
The Shanghai Composite looks set for a fourth weekly loss in five weeks, with energy
issues the top drags. PetroChina Co Ltd , China Petroleum & Chemical Corp (Sinopec)
and China Shenhua Energy Co Ltd , each lost between 1 and 2 percent.
Market watchers said moves by the central bank late last week to further tighten money
supply crimped flows into mainland equity markets this week and could limit any upside
for the Shanghai benchmark.
While short-term interbank borrowing rates have rebounded after the announcement of
the new measure, the liquidity drain and market disappointment of no monetary relaxation
are expected to keep investors cautious in the near term. (Editing by Chris Lewis)