China stocks closed down on Friday on concerns that the country's property sector is facing a prolonged downturn even with recent government support measures, while a reopening from years of strict COVID measures will be bumpy and uncertain.
The blue-chip CSI 300 Index lost 0.6% at close, and the Shanghai Composite Index slipped 0.3%.
Hong Kong's Hang Seng Index and Hang Seng China Enterprises Index both ended lower 0.3%.
Shares in Chinese real estate developers led the decline, falling 2.9%, while Hong Kong-listed mainland developers dropped 2.5%.
"The outlook on the (property) sector remains negative because of sluggish demand, and while the government's new policies could ease funding constraints, they will take time to have an effect," rating agency Moody's said on Friday.
China's property sub-index jumped more than 30% in November, as Beijing stepped up support to increase liquidity in the industry and stave off more developer debt defaults to get construction on unfinished homes moving again.
Moody's also said risks to the stability of China's financial system are rising on continued sluggishness in its property sector and an economic slowdown. The financials sector dropped nearly 1% on the day.
Stocks in non-ferrous metal and automobiles sectors also retreated 1.6% and 2.1%, respectively.
Still, China's CSI 300 Index climbed 2.5% for the week, logging the best week in a month, amid signs China is beginning to exit its zero-COVID policy. Meanwhile, Hong Kong's Hang Seng benchmark jumped 6.3%.
China is expected to announce an easing of its COVID-19 quarantine protocols in the coming days and a reduction in mass testing, sources told Reuters.
Analysts at Citi said "the government is clearly moving actively towards reopening instead of doubling down pandemic control measures".
However, Nomura cautioned "the path to 'living with Covid' may still be slow, costly and bumpy".
Oxford Economics said a full reopening in the second half of 2023 is the most likely outcome. (Reporting by Shanghai Newsroom; Editing by Kim Coghill and Raissa Kasolowsky)