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Hong Kong stocks failed to hold the 20,000 level by the luncheon break on Thursday, as an upbeat start queued by a stronger performance for US stocks gradually faded in the

morning session.

The Hang Seng Index ended morning trade down 0.44 per cent or 88.52 points at 19,914.97 while the Hang Seng China Enterprises Index ended little changed, shedding 0.02 per cent or 1.30 points to 8,372.79.

Francis Lun, chief executive of GEO Securities, said that Hong Kong stocks dropped because of profit taking after Wednesday’s rapid rise, and that equities are likely to slump further into the afternoon to a supporting level of 19,500.

“The market surged too much yesterday. Some people will sell and take profit, that is quite natural and that’s why the markets are falling back,” Lun said. “Even the local properties are falling back slightly.”

Among stocks with the biggest turnover, Lenovo Group’s shares dropped 3 per cent to HK$6.49. International Business Machines Corp is planning to sell 182 million shares, worth US$150 million (HK$1.17 billion), in Lenovo at a price equivalent to a discount of up to 6.4 per cent of Lenovo’s Wednesday closing price, Reuters reported.

Meanwhile, shares in Tencent fell 0.94 per cent to HK$146.90, Ping An lost 0.87 per cent to HK$34.20, China Mobile shed 0.35 per cent to HK$84.95 and Cheung Kong Infrastructure Holdings decreased 3.97 per cent to HK$76.30.

Mainland stocks finished the morning session with gains. The Shanghai Composite Index gained 0.23 per cent or 6.46 points to 2,856.14 while the CSI 300, which tracks the large caps listed in Shanghai and Shenzhen, was a marginally higher 0.06 per cent or 1.73 points to 3,053.06.

The Shenzhen Composite Index tacked on 0.72 per cent or 12.75 points to 1,773.33 while the Nasdaq style ChiNext rose 0.64 per cent or 12.98 points to 2,030.58.

The PBOC set the yuan reference point against the US dollar at 6.5412, 78 basis points stronger than its fixing on Wednesday.

Caixin’s Purchasing Manager’s Index fell from January’s six-month high of 52.4 to 51.2 in February, indicating that the growth of China’s services sector has slowed.

“China’s economic activity is slowing down, that comes as no surprise,” Lun said, regarding the services data. “But this week we witnessed some frenzy buying in properties, so this month’s PMI will definitely rise. The mainland market is quite stable. The national team is providing support.”

Bank Julius Baer & Co. strategist Mark Matthews in Singapore said in a note Thursday morning that regional stocks appear set for a continuing rebound, although he cautioned that the upward action might be temporary.

“A bear market rally can be better than the real thing. Is it happy days and [will] we take

out new high? Unlikely. Does the rally fade? Probably. But stay long things you

like – and there is plenty around. You don’t need to be bullish where there is yield

and great value,” Matthews said.

The US markets rallied overnight, and employment data pointed to a brightening picture in the US where private sector employers added 214,000 jobs in February, exceeding expectations, according to payroll firm ADP National Employment on Wednesday.

In New York all three major US indices closed up on Wednesday with the Dow Jones Industrial Average finishing 0.20 per cent or 34.24 points up at 16,899.32 and the S&P 500 tacked on 0.41 per cent or 8.10 points to 1,986.45. Meanwhile, the Nasdaq Composite ended up 0.29 per cent or 13.83 points at 4,703.42.

On the energy markets, crude oil future rose for a third straight session, as US government data showed a decline in weekly domestic oil output. West Texas Intermediate for April climbed 26 US cents, or 0.8 per cent, to settle at $34.66 a barrel on the New York Mercantile Exchange.

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