Hong Kong shares rose for a second day on Friday as coal counters clawed back steep losses from earlier this week, buoyed by favourable stimulus rhetoric from European central banks and ahead of a slew of U.S. and China data.
Mainland Chinese markets were relatively more subdued, with property-related sectors buoying index gains as investors welcomed a report in official media on long-term efforts to control home prices.
At midday, the CSI300 of the leading Shanghai and Shenzhen A-share listings was up 0.6 percent, while the Shanghai Composite Index rose 0.2 percent. On the week, they are each up 1.6 percent, headed for their first weekly gain in five.
The Hang Seng Index, which hit a one-week low on Wednesday, was up 1.5 percent at 20,766.6 points. The China Enterprises Index of the top Chinese listings in Hong Kong climbed 1.9 percent.
On the week, they are now down 0.2 and 1.3 percent, respectively. Both have had losses in six out of the previous seven weeks.
But turnover in Hong Kong was again weak with the United States coming off the Independence Day holiday and with non-farms payroll due later on Friday, which investors are watching for clues on the anticipated tapering of the Federal Reserve's monetary easing.
Short selling interest accounted for 6.6 percent of total turnover at midday, after having stayed above 10 percent for more than two weeks, versus a historical 8 percent average.
"There's definitely some more short covering today in Hong Kong ahead of the U.S. data later today and China data next week," said Larry Jiang, chief strategist at Guotai Junan International Securities.
"But if Temasek's statement yesterday is anything to go by, there's definitely some institutional buying after recent weakness. It's not possible for people to meet their investment goals otherwise," Jiang added.
Singapore state investor Temasek Holdings Pte Ltd stood by its investments in China's top banks on Thursday, saying they were well equipped to cope with disruptions such as the recent interbank credit crunch.
It also said structural change in China could yield further investment opportunities, both in state-owned enterprises and private companies.
Chinese coal counters, which most regard unfavourably as China aims to moves from low to high-quality growth and more environmentally friendly sources of energy, led index gains on the Hong Kong for a second day after slumping to 2008 lows on Wednesday.
China Shenhua Energy followed Thursday's 5.5 percent rise with a 6.7 percent gain in Hong Kong, with traders attributing the bulk of flows to short covering. Shenhua is still down nearly 40 percent on the year, compared to the 8.3 percent slide on the Hang Seng Index.
Shenhua's H-share listing is currently trading at 6.4 times forward 12-month earnings, a record low and a 49 percent discount to its historical median, according to Thomson Reuters StarMine.
Shares of China Rongsheng Heavy Industries plunged 13.2 percent to a record low after the country's largest private shipbuilder said it had sought financial help from the Chinese government and big shareholders after downsizing its workforce and delaying payments to suppliers.
CHINA PROPERTY SHINES
The Chinese property sector was another outperformer ahead of June China economic data next week. New loan growth and money supply is due from Monday, inflation on Tuesday and trade on Wednesday. Second quarter GDP is expected on July 15, as is data for monthly industrial output, urban investment and retail sales.
China Vanke jumped 4.1 percent in Shenzhen after the country's largest property developer by sales managed to maintain flat monthly sales despite Beijing's efforts to cool the housing market.
The official Shanghai Securities News reported on Friday that China is studying measures including expansion of the property tax pilot programme as well creation of a nationwide information network and uniform real estate registration system to help control home prices.