Hong Kong Stocks End Record Win Streak as China Small Caps Sink

(Bloomberg) -- A record winning run in Hong Kong stocks came to an end on Monday as investors took profit in some of the best performers.

The city’s benchmark Hang Seng Index slipped 0.2 percent at the close, snapping a 14-session rising streak. The gauge earlier rose above its record closing high made in 2007 before giving up gains. Country Garden Holdings Co., which has rallied more than any other stock on Hang Seng Index in the past year, slid 5.7 percent. In Shenzhen, a measure of small caps tumbled 3 percent amid concern the government will keep liquidity tight.

Hong Kong’s equity benchmark has rallied 4.8 percent this month, extending last year’s 36 percent advance. That sent its relative strength index to 80, the highest since February 2017, and above the 70 level that suggests to some traders shares are overbought.

There’s little sign of euphoria in China’s ChiNext index, which has fallen into the red for the year, extending 2017’s trend where investors sold small caps to buy the biggest companies. The China Banking Regulatory Commission said on Saturday that it would focus on unhealthy corporate governance and shadow banking, a move that analysts said worried investors.

"The CBRC’s regulation triggered renewed concerns about liquidity tightness on the mainland," said Shen Zhengyang, an analyst at Northeast Securities Co. in Shanghai. "In general, A shares are in a similar mode to last year, where only a small portion of the market is rising because the tightening bias is unchanged."

Foreign investors sold 1.6 billion yuan ($255.8 million) of Shanghai stocks on Monday, the most net selling via a trading link with Hong Kong since Dec. 6.

To contact the reporter on this story: Jeanny Yu in Hong Kong at jyu107@bloomberg.net.

To contact the editors responsible for this story: Richard Frost at rfrost4@bloomberg.net, Philip Glamann

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