China shares rebounded from two-week lows early on Thursday, trimming losses after a stronger than expected preliminary private survey of factory activity in the country eased concerns about tightening measures.
But worries lingered as short-term money rates again spiked after the Chinese central bank refrained from injecting funds through open market operations for a third session. Beijing also strengthened regulations on the city's property market.
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At midday, the CSI300 of the leading Shanghai and Shenzhen A-share listings was flat, while the Shanghai Composite Index shed 0.2 percent. Both had earlier tested their lowest since October 8.
But Hong Kong markets were barely moved by the HSBC China flash purchasing managers' index (PMI), which came in at a seven-month high of 50.9 in October, compared with September's final 50.2.
At 0005 EDT, the Hang Seng Index sank 0.9 percent to 22,795 points, while the China Enterprises Index of the top Chinese listings in Hong Kong shed 1.1 percent to its lowest since end-September.
Still, losses in both markets were not accompanied by unusual spikes in turnover in both markets, suggesting there was not yet any panic in a repeat of the end-June cash crunch.
"I still wouldn't add on any new positions from here, growth plays are looking especially precarious," said Hong Hao, chief strategist at Bank of Communications International Securities.
"Cash demand is going to be high in October because people have to pay taxes and banks have to park reserves with the central bank, but I think people ought to see that the People's Bank of China has already tightened in a way because they have not sold any yuan, allowing the yuan to spike," he added.
"Property restrictions usually doesn't bode well for the stock market and we are starting to see them appear," Hong said. He recommended investors start to take profit in the market.
Chinese property stocks mostly slid after the official Xinhua news agency said that authorities would also increase scrutiny of mortgage applications and strengthen oversight of pre-sales of property.
The Beijing Housing Authority said separately that it would speed up construction of lower-priced apartments and ensure an adequate supply of land to build 20,000 new homes,
In Hong Kong, Country Garden tumbled 4.3 percent, while China Resources Land tanked 3.4 percent. Vanke slipped 0.2 percent in Shenzhen, while Poly Real Estate shed 0.8 percent.
The Chinese banking sector was broadly weaker in Hong Kong but patchy in the mainland. The "Big Four" players each lost more than 1 percent in Hong Kong, as did the more prominent mid-sized lender China Minsheng Bank.
But Shenzhen-listed Ping An Bank jumped 4.2 percent, headed for a second day of gains after posting robust third quarter earnings. Mid-sized rival Industrial Bank rose 1.8 percent.
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Great Wall Motor, which closed in Hong Kong on Wednesday at its record high, dived 4.8 percent ahead of its quarterly earnings. Losses on the day weighed on the Chinese auto sector listed in the offshore market.
Up 98 percent on the year, Great Wall is trading at 12.6 times forward 12-month earnings, a 41 percent premium to its historical median, according to Thomson Reuters StarMine.
Other key earnings expected later in the day include ones for China Unicom and Zijin Mining. They were down 0.3 percent and flat in Hong Kong, respectively.
Wing Hang Bank climbed 1.7 percent after Reuters reported Agricultural Bank of China is considering a bid for the Hong Kong family-owned bank.
Trading in the shares of another family-owned bank, Chong Hing and its holding company Liu Chong Hing were suspended on Thursday. Reuters reported that Yue Xiu Group, the trading arm of China's Guangzhou city government, is close to an agreement to buy Chong Hing Bank.
(Editing by Jacqueline Wong)