Hong Kong shares inched higher on Friday but was susceptible to declines next week if weakness in large caps and persistently low turnover send the benchmark below the 200-day moving average, a support level that has largely held firm this year, according to Reuters. The trading debut of Glencore on Wednesday will probably be the highlight of next week and could draw more investors back to the market and halt an extended slump in volumes. The Hang Seng rose 0.2 percent on Friday largely because of a jump in China Unicom shares. The index fell 0.3 percent on the week and is down 2.2 percent in May as volatility in commodity prices threatens to end a two-month gaining streak. On the mainland, the Shanghai Composite let early gains slip to finish flat on Friday and down on the week as turnover hit a fresh four-month low as investors stayed on the sidelines. Mild gains in heavyweight financials and energy counters supported the broader market with PetroChina Co Ltd and China Citic Bank Corp Ltd the biggest support on the benchmark Shanghai Composite . "In the near term, the market will remain range-bound at least in the run up to the release of May economic data," said Cao Xuefeng, head of research at Huaxi Securities. "Limited liquidity will compound the situation." Traders expect the liquidity crunch to continue at least until the end of this month after lenders, including some major state-owned banks, appear to be suffering from a temporary shortfall of working capital after the People's Bank of China's latest hike in bank reserve requirement ratio (RRR) took effect on Wednesday, freezing 370 billion yuan ($57 billion). Some traders also speculated the PBOC may inject cash in the market via its open market operations again next week. Until then, market conviction is likely to remain weak. On Friday, A-share turnover hit a second four-month low in three days, barely hitting RMB 83.7 billion, some 36 percent below its 2011 daily average, now at RMB 131.7 billion. Bucking the low volume trend were material stocks, boosted on Friday after Beijing said on Thursday it will crack down on the smuggling of rare earths and impose quotas for exports of rare earth alloy products as part of its campaign to reform the sector. Inner Mongolia Baotou Steel Rare Earth (Group) Hi Tech Co Ltd gained 6 percent in volume almost 2 times its 30-day average, while Minmetals Development Co Ltd gained 8.3 percent in volume nearly 3 times its 30-day average. HK HOLDS 200-DAY MA, GLENCORE LISTING EYED Turnover on the Hong Kong exchange slipped below HK$60 billion for only the third time this year as market players shied away from making big bets. The market though held firm above its 200-day moving average, a level that has acted as good support for the benchmark over the past two months. "We believe that trading over the near term will remain volatile as investors lack conviction", said analysts from Daiwa Capital Markets in a note. "The cocktail of a widening EU sovereign-debt problem, rising core inflation globally, mixed economic data from both the US and China, and the end to the US Federal Reserve's QE2 programme would conspire to keep investors on the sidelines," said the analysts. One catalyst that could lift Hong Kong's turnover out of its extended slump is the trading debut of commodities trader Glencore, which is expected to start trading next Wednesday. Glencore shares listed in London were trading near their IPO price on Friday after ending its lukewarm debut day on Thursday unchanged at 530 pence. While the broader market remained tepid, another steady rise in mobile subscribers for April helped China Unicom gain 4.7 percent, adding to its stark outperformance against larger rival China Mobile Ltd this year. Unicom shares have ratcheted up gains of almost 50 percent in 2011 compared with a 10.3 percent drop in China Mobile. But this difference may well narrow. Analysts have cut their earnings estimates for Unicom by 16.6 percent over the past month, Thomson Reuters Starmine shows, partly reflecting worries that Unicom's position as Apple Inc's sole partner in China is no longer a given. Over the past decade, the two counters have rarely moved in opposite directions and any performance divergence has not lasted beyond six months, according to Thomson Reuters data. Developers in Hong Kong eked out gains as the sector's 0.4 percent gain on the week outperformed the broader market's mild drop. Bellwether Cheung Kong rose 0.7 percent, supported by attractive valuations and a break above the counter's 200-day moving average which suggested there were more gains to come. Hong Kong billionaire Li Ka-shing, who also controls Hutchison Whampoa along with Cheung Kong, said in a news conference on Friday he expects property prices in the territory to stabilize and said he would continue to raise his personal stakes in both companies.
