The China gateway Hong Kong stock market finally decided to consolidate another year-high close this week, but it wasn't so sure about it.

After a brief, two-day pullback from last week's high close for the year, the blue-chip Hang Seng Index roared to another year-high this Monday, 22,944, and flirted with 23,000. But then a four-day slide brought the Hang Seng below its 10-day moving average to 22,456, down 98 points and 0.4% for the week. The index of Chinese stocks slipped 1.0% for the week, 132 points, to 13,330.

Unlike some previous retreats, this one lacked drama. An absence of fresh incentives contributed to declines Thursday and Friday, according to KGI Asia's daily reports, and weak turnover Friday reflected a lack of momentum. That contrasts with the near-6% plunge after the year-high close four weeks ago.

This week prospects of measures to cool off the Mainland property market pressured Chinese property companies, and Mainland banks faced profit-taking, Nicholas Yeo, head of China and Hong Kong equities at Aberdeen Asset Management, told the Weekly Report. "There wasn't a lot of news to drive the market," he said.

"We've rallied a lot, and it's not surprising there's a consolidation," Yeo said. "It's only healthy." The market is at something of a balancing point now, he said, because it is fairly valued overall. Good earnings reports in the new year will be needed to drive the market solidly higher. Some sectors are overvalued, according to Yeo, including consumer products and Internet companies.

By Gene Linn
After studying Chinese language in the Army, Gene Linn earned Bachelor’s Degree in journalism and a Master’s in East Asian Studies, focusing on Chinese language and politics. He worked for 14 years as a freelance business reporter in Hong Kong. One of his jobs was to write daily Hong Kong stock market reports for UPI for four years. He started writing a column on China-related stocks for EQUITIES Magazine in 2004.